As the second largest foreign exchange earner behind tourism, and the employer of a substantial amount of Tunisia’s workforce, the textile sector is an engine of economic growth for the country, but some minor changes in European legislation have challenged the competitiveness of Tunisian firms, who rely on Europe’s market for the bulk of their exports.
The European Union recently abolished import quotas on Chinese textiles, effectively opening the door for low-cost Chinese cotton and silk, while competitors are worried that Asian product might now flood the market, pushing down prices and affecting the volume sold of more expensive product offerings.
The end of quotas on Chinese textile exports weighs heavily on the economies of countries around the Mediterranean. “Approximately one third of jobs in the area is likely to be severely affected by this competition”, says Jean-François Limantour, President of Circle Euro-Mediterranean, an association of leaders in textiles and clothing in the region.
With seven million direct jobs, the textile and clothing sector is the leading industrial employer in almost all the countries of the region. In Tunisia and Morocco, over 200,000 people are employed in the textile industry. In Turkey, one million employees work in the sector, accounting for a quarter of all industrial jobs. These three countries export 90% of their production to Europe, virtually without tariffs.
As some might have predicted, Moroccan textile exports fell by 22% in January and February 2008, according to Mohamed Tazi, General Manager of the Moroccan Association of Textile and Clothing Industries.
However, while some might worry, Tunisian firms remain to a large extent unaffected and continue to celebrate 2007’s year-on-year growth of 18.5%. Garment exports also continue to perform well, buoying demand for Tunisian textiles with export increases of 14% in value and 4% in volume. Underwear, in particular, is the forte of Tunisian garment manufacturers and has continued to register strong increases. According to a local boss of lingerie production, Samir Ben Abdallah, “the Chinese are disarmed when they face us in the high-end of the market.”
Geographically, the customers and providers of Tunisian textiles did undergo slight changes in 2007; however, the country as a whole continues to retain its traditional clientele. Exports to France, Tunisia’s main market, grew by 12%, while Italy, Tunisia’s second largest recipient of Tunisian textile, saw an increase in its imports by over 20%, compared to 5% in 2005 and 9% in 2006. Portugal recorded the largest increases in textile imports from Tunisia, registering 78.7% in 2006 and 45.5% in 2007.
New models
Increased competition from China is forcing Tunisian firms to rethink their business models. Traders are looking to forge links with new markets and, more importantly, to put pressure on market niches such as textiles, which means technical fibers used in well-defined applications will have special characteristics like flammable and electro-conductive insulation. These so-called smart textiles are used in aerospace, flak jackets and sports equipment and would add to the repertoire of Tunisian firms who already specialize in the high-end textile market.
Tunisia has also pushed for certain sector reforms to boost the competitiveness of national firms. The country-wide effort to upgrade the sector’s capability has reported “more than encouraging” results, according to Mehdi Abdelmoula of Maille Group. The program has allowed his company “to strengthen its material and immaterial structures to modernize its process, organize its management, and therefore improve its productivity. The upgrade also enabled us to have more input from our management and develop strategic thinking in the medium and long term.”
Sub-or-co-contracting?
This also means that to adapt to the new situation created by the flood of Asian products on the European market, Tunisia has chosen to adopt a strategy oriented towards the finished product through co-contracting with other companies. The strategy appears to be bearing fruit as the amount of exports in the sector hit an all-time high of $4.3 billion in 2007.
To cope with competition from China, Mediterranean countries were encouraged to move to manufacturing finished products instead of remaining producers of unfinished products. Regional firms have asked the EU for technical assistance for retraining of textile workers.
However, the idea does have its critics. Abdelmoula does not believe partnering with other textiles firms as an alliance against Chinese firms is a viable option. Although he does believe that it is an alternative resource for his foreign clients, maintaining a long-term outlook helps further brand establishment and maintain better standards of quality. It also allows firms to develop a distribution and collection network.
