The campaign for ‘Make in India’ is only getting louder, but does it in anyway impact or influence the garment industry, and more importantly, is there anything in the recent ‘special package’ for the garment industry that could encourage fresh investments in this industry that too in tier 2 and tier 3 cities, where the labour is located…, not many have an answer to that! While many feel that the spirit and intent of the policy is really good and it is now up to the industry to derive the value. As it stands today, fresh investments have to be seen in the context of options available to manufacturers on a global basis, and since the apparel trade is no longer centric to one manufacturing base, companies are setting up factories in different places, both within and outside the country, to get mileage from location strengths.
With global apparel retail sales touted to cross US $ 1.4 trillion by the end of 2016, the sourcing options for apparel retailers have never been so diverse. Even as the fraternity makes peace with China’s mounting wages, the pace at which Bangladesh has developed and Vietnam is being developed is enthralling. India has been struggling to stay competitive and though small run, design-oriented programmes are coming to the country; it is not enough to sustain the industry and its growth path. Meanwhile, the wage bomb is ticking for all destinations and even in both Bangladesh and Vietnam, where the economy is improving, the opportunities in other sectors will soon start weaning away the workforce from apparel factories to other emerging sectors. Simultaneously, Ethiopia has emerged as the hot and actively pursued manufacturing destination.
Ethiopia, an attractive investment…
Ethiopia is said to be a place where one can go for fibre to factory, and cheap plentiful labour at US $ 21 a month, inexpensive power, and a Free Trade Agreement with US augment the country’s business case; top it up with vast land, ripe for cultivation of cotton which will serve as a source of raw material. The biggest challenges that remain, however, are the production inefficiencies and lack of a competent local sourcing network rather than the widespread perception of being a corrupt nation and not being as dexterous as Asians.
Though the export is a mere US $ 60 million at present, the companies that have established their presence in Ethiopia are building capacities which will translate to exponential growth. Despite the fact that there is no comparison between Ethiopia and Myanmar, Ethiopia is considered the first choice destination to set up a factory.
In spite of some striking flaws in Ethiopia’s politics, economy and infrastructure, as far as the production of garments for the Western markets is concerned, there’s a feeling that the country has a great future. Many sourcing specialists who have explored the global opportunities agree that today Ethiopia is the place to be. “Ethiopia is currently the No. 1 sourcing location”, according to the apparel sourcing company Duty Free Sourcing Inc. Also the Indian entrepreneur Sidarth Sinha, the Founder and Owner of Vogue and Velocity Group, who is in process to create a ‘garment township’ in Ethiopia, believes that no other country can presently beat Ethiopia. His company, Velocity, intends to keep its existing 5 factories in Egypt at work, with around 4,000 employees, it will expand forcefully in Ethiopia. A new garment factory in Mekele with 3,000 workers will mainly manufacture knits and denim articles. Velocity plans to ultimately employ some 10,000 people in Ethiopia. Customers of Velocity include brands like Levi’s, Vanity Fair, Target, Zara, H&M.
In October 2015, the Indorama Group, the world’s largest integrated manufacturer of polyester, was said to be discussing with the Ethiopian Government the setting up of a polyester plant in the country. This rumour has not yet been confirmed. In March 2015, the Indian denim giant Arvind started manufacturing denim bottoms, 12,000 pcs./day, in the textile industrial zone of Bole Lemi (near the airport of Addis Ababa). Exports were initially destined to US, but at the end of 2015 negotiations were underway with potential European customers like H&M and Benetton. Arvind was said to be working on an integrated supply chain in Ethiopia, starting from cotton cultivation to spinning and weaving.
However, beating Arvind to the pole, Kanoria Africa Textiles, a subsidiary of the Indian group Kanoria Chemicals & Industries, on 24 October 2015 inaugurated a brand new denim fabric factory – the first in Ethiopia – with an annual capacity of 12 million metres in Bishoftu, 37 kms from Addis. The factory that started with less than 500 workers has plans to extend activities to jeans manufacturing. Kanoria will ultimately employ some 2,000 people in Ethiopia. According to Ethiopian media, India’s Raymond Ltd. company, the world’s largest integrated manufacturer of worsted fabric, has concluded an agreement with the Ethiopian Investment Commission to invest US $ 100 million in Ethiopia. The East African country hopes that Raymond’s engagement in Ethiopia will attract other investors.
The India alternative… Is North-east an option?
The ‘Make in India’ campaign is symbolic of the opportunities and benefits that come with sourcing from India. The Prime Minister has travelled extensively to communicate the Indian capability which has elicited confidence in investors and the manufacturing community back home. Most importantly, even the documentation regulations have been relaxed to the satisfaction of many foreign investors. Further, the schemes for setting up garment manufacturing factories in North-Eastern states of India are an exciting proposition and the hub can be cultivated for the future as the issues of labour shortage are bound to haunt the existing hubs. For now, the Government can begin with hand holding a few model projects to communicate the opportunity that lies. “The two major problems in the North-east as of today is shortage of skilled labour and logistics, since there is no access to harbour for shipments. Some small units for domestic market are coming up, but looking at a huge garment export unit in the region is not very viable,” says Angel Hazarika who runs a small knitting unit for T-shirts in the region. If goods are to be transported from Mumbai or Bangalore to North-east, it could well take 12 to 15 days. Business today cannot afford these kinds of time lines.
Despite these hurdles, the development of North-eastern region of the country is a relevant step in the light of the industry’s search for competitively priced labour force. The area has ample labour which can be skilled to match the requirements of the industry. Besides, the area is naturally blessed with handicraft acumen which must have honed the labour’s attention to detail. Scaling up in these regions however will be an issue and the challenge will be to achieve as timely match between demand and supply. HKL Magu, Managing Partner, Jyoti Apparels, is sceptical of the proposition of apparel manufacturing in North-east. “I am not too confident of it yet, especially for the export market. There are several issues which are infallible. The connectivity to ports is poor – whether it is for receiving raw materials or sending out finished goods. Moreover, all the buying offices are based out of metro cities.
The region might turn out to be a valuable area for the domestic market. Various locations, such as Bihar, Orissa, and Madhya Pradesh, are popping up and are inviting the interest of apparel manufacturers, but for now, only large-scale manufacturers with high volume of orders can work out of the off-beat hubs,” he says. Madhya Pradesh no doubt has the potential to become an apparel manufacturing hub because of the abundance of labour – a key requirement that a hub must have, everything else can be developed. Names like Pratibha Syntex are already there which indicates the virility of the region for apparel manufacturing.
Many industry watchers believe that better capacities can be unlocked if the Government takes up a cluster-specific approach. Not every cluster will need subsidies. A blueprint of initiatives can be chalked out to enhance the potential of each cluster. The potential for success of this approach is reflected in the trade volumes from the Tirupur cluster, where the trade has been growing at the rate of 15 per cent for the past couple of years. “It is also noteworthy that the Ministry of Textiles has 4 Joint Secretaries, and all of them are based out of Delhi, away from hubs such as Tamil Nadu. It is about time that the Ministry also reaches out to the industry and its people,” points out Prabhu Dhamodharan, Secretary, Indian Texpreneurs Federation (ITF), Coimbatore. He adds that ITF has requested for and presented the idea of “global textile fair” where manufacturers from the entire Indian apparel manufacturing fraternity can put up a show of their product development prowess. The Ministry is in the process of finalising it.
Unlike other sectors, the apparel manufacturing sector does not have any big billion dollar groups, which could encourage new entrants. “To be honest, the ‘Make in India’ initiative has not made any impact on the garment sector. Unfortunately, the initiative seems to be more investment-driven rather than employment creation-led. As a result, mega investment projects, which perhaps make for more headline grabbing photo-ops, are the focus rather than multiple small- and medium-sized projects which actually create huge number of employment generating opportunities,” says Rahul Mehta, President and Trustee, Clothing Manufacturers Association of India. He adds, “Decisions which can give tremendous boost to the industry – and therefore job creation – such as FTA with EU, are kept in abeyance because some high ticket but low employment generating industries, oppose it. Thus, unless the whole philosophy of ‘Make in India’ is redesigned to be employment-driven, I do not see it making any significant impact on the Garment Industry.”
‘Make in India’ is a call for ushering in investments in the Indian manufacturing sector. For the apparel manufacturing sector, the most pertinent development in this sense have been investments from Uniqlo and IKEA. Other than that no big ticket investments have been made. The industry did grow, that too when EU one of our biggest markets declined, but this is barely correlated with the ‘Make in India’ initiative. This is merely indicative of how diversified our target markets are. Today, we need more investments to make supply chain and logistics more efficient, besides product and design development. The PPP model of investment can be tried out for the Indian market. “We were awaiting developments on the lines of Brandix City, but due to procedural issues and lack of level playing opportunities, the projects have not matured yet. The Indian Government can work on improving the port infrastructure,” concludes Chandrima Chatterjee, Advisor, AEPC, Delhi-NCR.
