TRALAC - Trade Law Centre

Rising costs in Asia makes AGOA countries attractive

Saturday, 03 November 2012

Source: Fibre2Fashion

The textile and apparel sector from around 40 African countries, which make up for the African Growth Opportunities Act (AGOA), expects to attract investment from local as well as overseas entrepreneurs, but mainly from the Asian continent.

Confidence stems from the US extending the third-country fabric clause in garment exports from these countries to the US till Sept 2015, which entails duty-free apparel exports to the US and makes them even more attractive destinations.

Secondly, production costs in Asian countries like China are rising, which will help divert a few production bases if not many to these African countries, in order that these apparel exporters maintain the same competitiveness.

Three countries – Mauritius, Ethiopia and Tanzania after recording good growth rates in exports to the US, repeated the same feat half-way through 2012. Mauritius fresh from strong growth in 2011, witnessed 25 percent y-o-y growth in first six months of 2012.

Ethiopia and Tanzania, albeit from smaller bases, have seen their AGOA exports increase by 70 percent and 110 percent, respectively. However shipments from a traditional apparel producer and exporter – Kenya saw a marginal growth of only 2 percent in 2012.

“Exports from Tanzania and Ethiopia have skyrocketed primarily because they started with a low base, so doubling revenue was not astronomical and thereby sales growth looks great,” says Mr Jas Bedi, Chairman of African Cotton Textile Industries Federation (ACTIF).

“However, if the US government had not extended the third-country fabric sourcing clause, the whole textile and clothing industry in those countries would have collapsed”, informs Mr Bedi, while speaking to fibre2fashion.

Revealing the optimism behind attracting overseas investments, he explains, “Yes we are optimistic that garment production will shift to the AGOA countries to enhance product competitiveness, as costs in Asia continue to increase”.

Total apparel exports from AGOA countries jumped from US $789.49 million in 2010 to $903.21 million in 2011, while in the first eight months of 2012, they stood at $569.77 million.