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Fiji textile and clothing industry in restructure mode

Reena Mital - Mumbai

The Federation of Indian Exporters Organisation (FIEO), western region, is planning a delegation to Australia, New Zealand and Fiji in February 2004. The federation is targetting around 50 companies and 75 delegates, representing various sectors of the Indian industry, to participate in the business delegation.

Speaking to Express Textile, Mr G K Gupta, chairman, FIEO, western region, said, “This will be a multi-product delegation, with representatives from the apparel, fabrics, made-ups, handloom sectors, leather, engineering goods, chemicals and allied products, IT, etc. Australia and New Zealand are definitely markets for Indian products, but no export promotion council or federation has really explored Fiji as a market. One reason for this could be the Indian government’s ban on trade with Fiji till some time back. But these sanctions have now been removed, and this country has a lot of potential for Indian goods and services. Moreover, majority of the population in Fiji is Indian, so understanding the needs of this market are easier.”

According to him, the scope for exports of traditional items to Fiji is also good as value-additions here are very high, and Indian goods would thus fetch better realisations. “Indian exporters of traditional handlooms and handicrafts have already made a mark in the Middle East, the UK, USA, EU, etc. We must realise that Fiji too is an important market. Moreover, if large number of delegations are going to Australia and New Zealand, why not explore Fiji too,” he opined.

According to industry sources, with sanctions on trade, etc, India’s textile exports to Fiji were quite insignificant. According to available statistics, exports of synthetic and rayon textiles to Fiji during 2002-03 stood at a mere Rs 10.11 crore. However, this was a growth of 51 per cent over the exports in 2001-02. Major items of export include fabrics accounting for 78 per cent of the total synthetic textile exports, made-ups 15 per cent, and the remaining were yarn exports. “Fiji is an emerging market for Indian textiles, and we have only just started looking at this country for exports,” said sources.

It is felt that unless Fiji emerges as a major conversion centre, or reexporter, like Mauritius or Madagascar, it may not be a very big market for Indian textiles. “The domestic market in Fiji is very small, so exports targetted only at that market would not be very significant,” feel sources.

It may be noted that textiles and clothing is the second largest industry in Fiji, and there are efforts at restructuring this industry, to enable it to survive post-2004. Moreover, the US is proposing a preferential access for Fiji’s garments into the US. USA is the second largest market for Fiji’s garment exports.

Australia steps in

Australia has urged Fiji to restructure its textiles and garment industry to survive the increasing international competition. According to reports, Australia has warned Fiji that it must reform its textiles and garment industry or see it disappear. Australia has also offered to commission a study on the restructuring of Fiji’s garment manufacturing industry. The Australian foreign minister, Mr Alexander Downer has told the annual Australia-Fiji business forum that Fiji’s government must take a hard look at the competitiveness of one its main industries. “We must be realistic - increased competition means that reform is not a choice, it’s a necessity,” he said. “The choice is between having a textile (industry) that is competitive, or watching it disappear altogether. Australia stands ready to help. As a first step, we’re prepared to fund and participate in a comprehensive joint study of Fiji’s garment sector to identify what needs to be done to restructure it for global competition.”

Australia is the largest textile supplier to Fiji’s garment industry. According to Australian exporters, “Opportunities exist in the supply of textiles to the garment industry in Fiji, which specialises in cut, make and trim of garments for reexport.”

Major Australian textile exports to Fiji include:

• Woven fabric - yarn of combed wool
• Woven cotton fabric - unbleached
• Terry fabric - knitted or crocheted
• Woven fabric - metal thread
• Non-woven special yarns
• Synthetic woven fabrics - unbleached or bleached

The majority of textiles exported from Australia are suit material, knitted fabric and workwear cloth. Much of this is reexported to Australia as made-up garments, under Cut, Make and Trim (CMT) arrangements. Textiles not imported under CMT arrangements are normally priced CIF/FOB on metre lengths.

The SPARTECA Agreement that used to allow the duty-free entry of goods into Australia has changed over recent years and the import credit scheme was cancelled in October 2000. A new scheme, SPARTECA (TCF) commenced in March 2001 following extensive negotiations with Australian and Fijian textiles industries. The scheme is still being tested and indications are that it will require substantial change to be effective in helping the industry to progress.

The export of garments is a major revenue earner for the Fijian economy. It was the country’s third largest income earner after tourism and sugar in 2000. The income generated from the industry has grown from F$ 4.9 million in 1986 to over F$ 313 million in 2001. It is one of the major employers in the economy before the ‘coup’ of May 2000 with about 18,000 employees.

Tariffs, regulations and quotas

There are no restrictions on the import of textiles or hides and skins. Textiles for manufacturers within Tax Free Factories or Tax Free Zones (ie. for reexport) are duty-free. Otherwise, duties range from zero to 27 per cent, depending on the nature of the textile. The import duty on hides and skins is three per cent fiscal plus value added tax (VAT) is 12.5 per cent.

Market entry strategies

There are approximately 120 textile, clothing and fashion industry organisations in the Fiji manufacturing sector, therefore it is advisable when considering exporting textiles to Fiji to conduct market research.

Australian exporters of textiles mostly deal direct with Cut, Make and Trim (CMT) garment manufacturers or overseas buyers of the finished products. The latter seems to be more common as the industry is largely export orientated. Australian textile suppliers are recognising the potential threat to their position coming from aggressive price-based competition. Suppliers in Asia and South Asia such as China, Taiwan, Pakistan and India have started to market to this industry. China and Taiwan have quickly become significant exporters of fabric to Fiji, along with New Zealand.

Distribution channels

Most textiles are normally imported direct from the supplier/manufacturer. Some local fabric merchants do, however, import and then distribute to end-users. Distribution is unstructured and depends on individual manufacturer preferences and personal arrangements. Payment terms vary according to the relationship between the buyer and supplier. Methods include, trading terms of 30, 60, 90 or 120 days, sight draft and letter of credit.

US explores possibility of preferential access of Fiji garments

The US is exploring the possibility of granting Fiji’s garment exports preferential access to the US markets. The USA-based firm of Sandler, Travis & Rosenberg, PA has been appointed to explore the possibility of improved preferential access of Fiji’s garments to the US markets. Sandler, Travis & Rosenberg had played an integral role in the creation of the African Growth and Opportunity Act (AGOA), which allows duty-free and quota-free access of garments from selected sub-Saharan countries in Africa to the USA. The firm was currently overseeing the implementation of this access agreement.

The textile industry is Fiji’s second largest foreign exchange earner and currently employs approximately 17,000 workers. The USA market is Fiji’s second largest export market for textiles after Australia. Fiji’s total exports of garments to the USA, valued at US$ 126 million in 2000, comprise less than one per cent of total USA textile imports.

The Fiji Textile, Clothing and Footwear Council estimates that with an AGOA type agreement, Fiji will be able to achieve export receipts of garments to the USA of at least US$ 400 million per annum. The US government is, however, mindful that it would be difficult to negotiate an AGOA type agreement on a bilateral basis with the USA. Sandler, Travis & Rosenberg is, therefore, exploring the feasibility of an AGOA type agreement on a regional basis between Forum Island Countries and the USA.

Bilateral trade agreements

Fiji adopts a multi-faceted approach to trade and is signatory to a number of bilateral, regional and multilateral agreements.

Bilateral trade agreement with Pacific Island Countries

Currently, Fiji has in place a non-reciprocal Bilateral Trade Agreement (BTA) with Tonga since 1995. Non-reciprocal concessions are also offered to Tuvalu and the Cook Islands through BTAs signed in 1998 in Funafuti and Suva. On the other hand, Fiji also signed reciprocal BTAs with PNG at the end of 1996 and in 1998 with Vanuatu. Bilateral negotiations have also been initiated with the Solomon Islands, New Caledonia and Kiribati including Nauru, and Samoa.

Bilateral trade agreements with developed partners

The Fiji-Australia Trade & Economic Cooperation Agreement (FATERA) was signed in 1999 in Canberra, Australia, setting the framework for better bilateral trade between the two countries in the long term. Australia is Fiji’s biggest trading partner (about 60 per cent of Fiji’s total trade is with Australia).

Negotiations on a Fiji/NZ BTA was suspended after May 1999. With the incoming of the newly elected democratic government, talks with the New Zealand government have been reopened. A major issue that is of interest to Fiji is the removal of the 25 per cent FIC local content required by the NZ government on rules of origin. NZ has been insisting that fruitful talk would only eventuate when Australia terminates its Import Credit Scheme (ICS). With the ICS now replaced by the SPARTECA-TCF provisions, it is an opportunity for Fiji to re-submit its proposal to NZ for reconsideration.

The USA is a major market for Fiji’s export of garments under a quota system as per the Bilateral Textile Agreement signed in 1995 between the two countries which expires by the end of 2004. Bilateral relations with Japan, South Korea and China have always been cordial. The newly promoted “Look North Policy” hopefully will further strengthen the relationship. Fiji has in existence a Bilateral Trade Agreement with China, signed in 1997, under which China offers Fiji’s exports MFN treatment.
The recognition of the need to engage a major emerging world power saw the opening of the Fiji Embassy in Beijing in July 2001. A bilateral agreement on agriculture was signed in August between China and Fiji and relevant ministries of both countries are also working on a bilateral agreement on quarantine issues.

Regional trade agreements

Melanesian Spearhead Group (MSG) Trade Agreement

The MSG Trade Agreement came into effect on July 22, 1993 through the efforts of PNG, Vanuatu and Solomon Islands. Fiji became a formal member of the MSG Trade Agreement on April 14, 1998. Even though the MSG countries have the potential to trade in over 200 products free of fiscal duty, the MSG Trade Agreement’s status as a nucleus for progressing trade liberalisation in the region has been overtaken by Pacific Island Countries Trade Agreement (PICTA) due to the decisions taken at the 10th MSG Trade and Economic Officials Meeting. MSG Trade Agreement, however, still maintains relevance for Fiji, and will continue to do so until all the MSG countries (PNG, Vanuatu and Solomons) fully commit to and ratify PICTA.

South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA)

SPARTECA was signed in 1981 between Australia, New Zealand and countries of the South Pacific Forum. It allows duty-free access for the products of Forum Island Countries (FICs) to the markets of Australia and New Zealand, subject to “Rules of Origin” regulations. The aim is to redress the unequal trade relationships between the two groups. The Textiles, Clothing and Footwear (TCF) industry has been a major beneficiary of SPARTECA through the preferential access to Australian and New Zealand markets. The rapid expansion of the Fiji TCF industry has been attributed to the removal of TCF quotas by te Australian government in 1987 which allowed quota-free and duty-free access under SPARTECA, the introduction of the Tax Free Factory/Zone (TFF/TFZ) Scheme in 1988 and the Australian Import Credit Scheme (ICS). The Australian Import Credit Scheme commenced in July 1991 as part of a larger package of tariff and other industrial reforms in Australia.

(With inputs from ABC Online)