Alternative regional approach: Considering the above factors, it is essential to ascertain an alternative regional approach to the erstwhile agreement of textiles and clothing.
The SAARC nations must evolve a common strategy to maintain their drive to reach the industrial winning post since the benefits of the quota-free regime must be favourably enjoyed by the 1.50 billion denizens living in the SAARC countries.
The pertinent question is whether this alternative approach would be established within the framework of SAFTA or would there be another parallel option to SAFTA.
In the context of SAARC countries, this regional alternative is based on a beneficial relationship among them, but this may not be possible until Indo-Pak disputes are resolved. Despite that, SAFTA is a reality, however handicapped.
The parallel approach may not be pragmatic considering the fact that the government officials may not be able to stomach or may not appreciate the idea of another rigorous exercise.
The paucity of detailed data, such as production targets, comparative production costs, raw material requirements, market needs, human resource expertise, etc, may deter the policymakers from undertaking this mission.
Therefore, the pragmatic solution would be to make SAFTA an advantageous channel for an alternative regional approach to the agreement of textiles and clothing.
Keeping in view the four objectives of free intra-regional travel, physical infrastructure linkages, harmonisation and standardisation, and common agreements, the textile and clothing sectors in the SAARC countries must formalise the 'textile and clothing chain' that encompasses all vital requirements.
THE VARIOUS AREAS THAT NEED DISCUSSION ARE:
ECONOMIC AND SOCIAL SIGNIFICANCE: Textiles and clothing are undoubtedly the mainstay of the SAARC economy. It is predominantly an SME-based industry, it is labour-intensive, and it is a prime employer of women.
This is the major source of revenue for the governments and contributes substantially to the social infrastructure in the region. The LDCs are more susceptible to the external forces since garments and knitwear are the backbone of their economies.
Moreover, these units also meet the domestic textile needs. The manufacturers in the region need to pool their strategies and initiate schemes to enter into joint ventures, linkages, suppliers, relocating, sub-contracting, and common warehousing, etc so that the advantages, expertise, and economies of scale available within their domain could be developed and utilised in a favourable mode.
The benefits would be shared since the global market share would be maintained and may increase rather than lost to third country manufacturers.
DISTINCTIVENESS: Textiles and clothings have undergone formidable transformation in the region. The emphasis has shifted from routine internal progress to a more radical approach. There have been massive investments made to introduce fundamental technological upgradation.
This has happened not only in large corporations but also at the SME level.
State-of-the-art technology has created a positive momentum in the textile and clothing industries. Acceptance of the conditionalities of Social Compliance has been another characteristic worth mentioning. Although this is more prevalent in the large and mega industries, it should be noted that sub-contractors too have been induced to change their mindset.
The dependence on large markets in North America and Europe preclude any lethargic attitudes or casual neglect. Companies are gearing up their production processes, their working environment, and their communications, so that speedy and rapid responses are possible to keep pace with consumer demands.
Human resource development is now an important element in companies since a skilled, trained, and competent workforce can make the difference between survival and being left reeling in defeat and heading for bankruptcy.
WEAKNESSES: Textiles and clothings need plenty of physical infrastructures, such as electricity, gas, and water. The perennial shortage of the infrastructure has restrained the growth potential of many companies in the region. Even in individual countries, there have been areas and industrial zones that have been denied a fair share of the country's infrastructure.
The SAARC countries have now embarked upon programmes and schemes to address the shortages on a fast track basis. India is spending close to $370 billion over the next five years to develop a physical infrastructure. Pakistan needs to spend over $10 billion urgently.
At the same time, President Musharraf has announced that dams would be built on a priority basis to store water and generate hydel-power. Sri Lankan President Mahinda Rajapakse has announced his vision called Mahinda Chintana under which, among other items, the focus would be on infrastructure development and the setting up of 300 clothing industries in undeveloped or under-developed areas of the island.
Moreover, the high rates of the infrastructure have added pressure to the cost of the finished products. The cost of complying with various standards, the cost of obtaining specified certification, and the added cost of applying processes and systems, has been phenomenal to the extent of over 50% frontloading on the final cost of the produced goods.
HUMAN RESOURCE DEVELOPMENT: Textiles and clothing industries face a paradox. On the one hand, certain sectors face acute shortage of skilled workers while at the same time, there are lay-offs in certain sectors.
Pakistan has made over $5 billion investment in the textile and clothing industries and the forecast is that another $5-7 billion investment would be made in the coming few years. 46% of that investment was made in spinning and fiber production, 24% in weaving, 12% in processing, 05% in knitwear and garments, 08% in textile made-ups, and 05% in synthetic textiles. 40% of the six million workers in the manufacturing sector are employed in the textiles and clothing industries.
However, at this moment in time, the jobs of those working in the knitwear industry are seriously threatened due to relatively fewer orders from the major markets. This is also common in other countries too where a similar situation is a possibility.
This situation is likely to aggravate after 2008 when China quota on Cat. 338 (T-Shirts) is lifted. Another serious issue is labour migration, both within the domestic environs as well as to foreign countries where the emoluments are more attractive.
RIGIDITY IN LABOUR LAWS: Textiles and clothing industries are facing difficulties in adhering to the outdated, irrelevant, and complicated labour laws that are still on the statute books. These laws are unsuitable in today's environment, yet sincere efforts have not been initiated to update these laws.
In Pakistan, various governments have attempted to bring about change in this field but there has not been any progress. Inspite of the commonality of views among the members of WEBCOP (Workers-Employers Bilateral Council of Pakistan), a visionary venture of enlightened workers' leaders and employers' representatives, the government has not made practical moves.
In India, the government is willing to remove any rigidity in the labour laws so that exporters are able to manage their working environment as per the demands of their buyers or as per the requirements of the production schedules. Many labour laws impede productivity, safeguard the rights of inefficient workers, and give discretionary powers to middle-level government labour inspectors.
INTRA-REGIONAL AND INTER-REGIONAL PACTS: Textile and clothing industries can take advantage of the agreements and understandings made by different countries within the SAARC. The Indo-Sri Lanka FTA, the Pakistan-Sri Lanka FTA, the final stages negotiations for the Indo-Bangladesh and the Pakistan-Bangladesh FTA, the bilateral agreements between India and Nepal and India and Bhutan are cases in point.
At the same time, India wants to set up the Asian Economic Community combining Japan, ASEAN countries, China, India, and South Korea. Pakistan has been unsuccessful in getting USA to sign the Bilateral Investment Treaty even during President George Bush's trip to Pakistan in early March 2006. Sri Lanka has found the FTA with India to be a big boon inspite of continuing hiccups in certain items.
BONDING, BINDING, AND BUILDING: The SAARC countries have to make textiles and clothing as the focal point for regional co-operation for their mutual benefits. The 'textile and clothing chain' has to become a reality inspite of the element of distrust and animosity prevalent among individual states. The following ideas need to be adopted:
NON-TARIFF BARRIERS: A gradual dismantling of non-tariff barriers within the SAARC countries is imperative. The stipulation that even goods from one regional country to another require certification and considerable documentary evidence has affected increased direct intra-regional trade in textiles and clothing.
These should be addressed on a priority basis. At the same time, standardised NTBs for goods produced from outside the region could be established by the SAARC countries so that imported goods could be given the same treatment.
REGIONALIZED PRODUCTS: Supply chains should be developed so that components of one finished product could be sourced within the region from suppliers or from areas that have expertise or excel in that particular component.
The cotton or yarn could be sourced from Pakistan, the fabric from India, the trimmings from India, and the stitching done in Bangladesh or Sri Lanka. Joint ventures could be set up to take advantage of the external conditionalities too, for example.
Travel advisories for citizens of major buying countries wanting to visit, say Pakistan, could be dealt with by shifting some production to Sri Lanka.
Another strategy could be to set up apparel industries in Bangladesh or Sri Lanka to take advantage of the preferential treatment accorded by USA or EU. Nepali industries can shift production to India or Bangladesh if production is hampered due to the Maoist insurgency.
RESOLUTION OF CONTENTIOUS ISSUES: The opening up of production facilities and the development of the intra-regional supply chain can also provide impetus to countries involved in bilateral contentious issues.
Pakistan and India have been at loggerheads for over six decades over the Kashmir imbroglio. Attempts to introduce a conducive environment have not yet paid dividends. One progressive step soon leads to two retrogressive steps resulting in increasingly belligerent outbursts on both sides of the border.
An enhanced bilateral trade regime between Pakistan and India with Pakistan accepting India's request to grant the Most Favoured Nation status, as outlined by the WTO, could introduce a trust factor between the two nations.
The government of Pakistan has declared that this could only be done after the resolution of the Kashmir issue. The government has been swayed also by the anti-India lobby that misconstrues MFN as a license to sleep with the enemy.
The undocumented trade moguls who thrive in transporting goods from one country to another are also threatened by the duty-free status stipulated in the MFN conditions. They have also exerted political and social pressure on the government to defer the granting of MFN as long as possible.
CREATIVITY ENHANCEMENT: Joint ventures, linkages, free movement of workers and experts, common marketing initiatives, sharing of brands, setting up of forums such as SAARC Apparel Exporters Consortium, removal of barriers to investment, skill development, standardised labour policy, legalising informal trade, curbing undocumented movement of goods, pooling of resources in agriculture based industries, sharing of information related to product development, marketing, and information technology, and sub-contracting, outsourcing, and capacity building, are some of the modes that could be utilised to deal with external competition, pricing, and consumer preferences. Yet, the most important factor is to develop trust and sincerity.
Eduardo Galeano, an Uruguayan essayist and historian born in Montevideo, Uruguay, into a middle class Catholic family, very aptly stated, "I don't believe in charity. I believe in solidarity. Charity is so vertical. It goes from top to bottom. Solidarity is horizontal. It respects the other person and learns from the other.
Most of us have a lot to learn from other people." This is what globalisation should really be about. This is what the world's political leaders and thinkers must achieve. This is what the person on the street is striving to attain. Solidarity.
(The writer is President of MHG Group of Companies.)
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