Jordan Times
Monday, July 12, 2004
New Jordanian think tank
advises garment exporters to diversify towards fashion-wear
By Rami Abdelrahman
AMMAN — While garment exports are competitive at the present time, much needs to be done if Jordan wishes to maintain or increase its current market share when the Multi-Fibre Agreement (MFA) ends in 2005, allowing developing countries to export quota free to industrialised countries, according to a recent report.
The report, entitled “Qualifying Industrial Zones
(QIZ) and the Jordan Quest for Sustainable Development,” notes in the post-2005
era, QIZ exports will lose the competitive advantage previously conferred by
quota free exporting to the US.
Once the MFA is gone, the market will become increasingly cutthroat, with low
cost exporters such as China, India and Bangladesh dominating the global textile
and clothing export market, according to the report.
“If QIZs are to remain a valid investment proposition, one inevitable strategy
would be to push for greater diversification. The biggest challenge is to
diversify export base from garments towards fashion-wear,” suggests the report,
the first published by the Jordan Centre for Public Policy and Research and
Dialogue (JCPPR), a think tank, whose inauguration was announced on Sunday by
HRH Prince Hassan Ben Talal.
The report explains that by moving up the value chain, Jordan can avoid
competitiveness from low-cost suppliers such as China, as well as increase its
export revenues.
Last March, Ministry of Industry and Trade and the Jordan-United States Business
Partnership established JGate — Jordan Garments, Accessories and Textiles
Exporters Association — to help upgrade the garments industry from producing
ready-made clothes to manufacturing fashion-wear.
The report agrees that in the face of a quota-free global market environment,
Jordan needs to help exporters find their competitive niches within the clothing
sector, a strategy aimed at avoiding the competition, instead of attempting to
outgun it.
In order to do that, the report says, the country “desperately” needs to upgrade
the skills of its workforce.
“Teaching people the type of skills required in the cutting and assembly of
fashion-wear and then making sure that their talents are effectively deployed is
an important part of the process of upgrading workers skills,” the report
states.
Here again, the report continues, the government has a “crucial role to play.”
The report recommended the establishment of a data bank to provide Jordanian
exporters with continuously updated information on their “revealed competitive
advantage,” and therefore enable them to better understand market trends and
potential.
The report explains that labour productivity, non-wage cost and the exchange
rate are also equally significant factors if QIZ exporters are to remain
competitive.
“When labour productivity is low, as has been the case in Jordan so far, the per
unit production cost of output tends to be high even if wages were to fall. That
is to say, it is not reduction in wage levels, but rather improving labour
productivity incentives which would be an ideal competitive strategy,” the
report reads.
“A less controlled, or more open market system, would also mean the relative
competitiveness of QIZ model will largely depend on tariff source of preference,
improving export logistics, diversification of export markets, solving the
problem of inadequate financing for QIZ manufacturers, and sourcing from the
cheapest and most efficient suppliers to help minimise the lead time,” the
report suggests.
The MFA has governed world trade in garments and textiles since 1974. The main
reason behind the agreement was to keep tariffs high on textile imports from
developing countries due to the fear that low-cost competition would lead to a
loss of jobs in the industrialised world.
Jordan's competitive advantage dates back to 1997 when the QIZ agreement was
signed. The agreement allows the Kingdom to export duty and quota free as long
as eight per cent of the product material originates from Israel. The QIZ
agreement stems from the 1994 peace treaty with Israel aimed at building peace
through economic ties.
Jordan, a member of the World Trade Organisation, also has a Free Trade Area
agreement with the US, among other countries, and shares preferential treatment
for its exports to the EU through other agreements.