TRALAC - Trade Law Centre

Malawi : AGOA Deadline Worries Textile Industry

Thursday, 12 June 2003

Source: BharatTextile.com

After the December, 2004 textile producer will not be able to source textiles for garment production for Agoa exports to America from within the country and the Sub-Saharan region.

This factor is worrying garment and textile players, Garment and Textiles Association of Malawi (GTAM) national consultant Julian Mhone said with the future of David Whitehead and Sons (DWS) in limbo, it will be difficult for the industry to source yarn and fabrics within the country.

Agoa conditions stipulate that least developed countries (LDCs) like Malawi and other Sub-Saharan states will only be given up to December, 2004 to import textiles from non-Agoa members.

After that period, garment producers for exports to the United States of America (USA) under Agoa will have to source their raw materials (textiles) from within the country or other sub-Sahara countries.

But analysts say with South Africa failing to produce sufficient textiles to supply its own industry, let alone the rest of East and Southern Africa, and with no investors arriving in the region to take up the slack, a shortage of textiles in the approved countries is likely.

As at now, the industry is relying on imports from the Far East for the yarn and fabric which will not be accessible after the deadline.

“Because Agoa only allows Malawi to use fabric from non-Agoa approved countries up till December 2004, there is a potential major problem on the horizon that needs resolving.

“This will probably require some effective negotiation and the revitalisation of DWS as a supply of textiles to the industry,” says part of the Ministry of Economic Planning and Development analysis report on the industry.

GTAM chair Kentiral Desai told The Nation recently that recent developments in the country, such as the suspension of duty free waivers for raw materials for the industrial sector, are retrogressive as they may reduce the industry’s chances of cashing in on Agoa before the raw material deadline.

Chinese Ambassador to Malawi Hsi Tsan Chen said recently that the local garment industry can benefit more from Agoa if the US extends the deadline.

But Marc Dillard, second secretary for commercial and economic affairs said last year that it would be difficult to change the deadline because, he said, only the US Congress can effect the change.

Until the early 1990s, DWS—an integrated spinner and weaver owned by government through Admarc—and Knitwear Industries, with knitting capacity, are the only firms in the industry producing the textiles.

Local garment producers have been shunning DWS’s textiles. All the fabric for the Cut, Make, Trim (CMT) operators is imported since DWS is unable to provide the necessary variety and quality at the right price.

DWS utilised locally grown cotton and high tariff protection from the previous government to enjoy continuous financial success until the 1990s when its fortunes waned after severe dumping and smuggling of finished textile goods and garments drastically disrupted its domestic market.

In its heyday, DWS comprised a large vertically organised production complex for spinning, weaving, dying and several other specialised finishing processes most of which are being under-utilised due to lack of capital. The textile giant is now pending privatisation.