The Sourcing Issues From Around the. Globe Panel. November 2010

Transcription

1 The Sourcing Issues From Around the Globe Panel November 2010

2 RMG is labor intensive industry China The main driver for this industry. Surpassed Japan as the world s second-largest economy last quarter. Nominal gross domestic product for the second quarter totaled $1.337 trillion. Economy grew steadily in recent years to reach 8.7% in 2009 and 10.3% in Q Exports dropped by 20% in year Local Investments & Private consumption are the main two drivers of the GDP that were mainly affected by the recession in 2009.

3 Apparel consumption decreased since Jan 08 and started rebounding in Jan 10 in terms of Quantity & Quality. The biggest importer for men s woven shirt in 09 counting for 633 million USD. The labor cost tripled in the last 10 years. Acceleration in urbanization and income distribution reform would shift earnings from corporate to employees leading to further labor cost growth and stronger domestic consumption. Active working population (15-54) which grew by 7 million per year in the past decade would decline by 1 million a year.

4 The drop in China exports is bound to be shifted to areas in the same region. (ex: India, Bangladesh, Indonesia, Pakistan, Vietnam, Cambodia)

5 India Worlds second largest producer of textile and garments. It is worth USD 53 billion. Domestic USD 34.6 billion (growing at 15-18% annually) Clothing USD 23 billion, Textiles USD11.6 billion Exports USD 18.4 billion Clothing USD 10.6, Textiles USD 7.4 billion Bangladesh Exports of Garments accounts for 77% of total exports. Exports increased from USD 8.5 million in 2005 to reach 15.5 million in EU and USA are the major two countries for exports.

6 Indonesia About 10 % of total exports is textiles and apparel. Employment increase average of 7% a year. Stable labor cost increase. Pakistan The Economy is recovering with an expected GDP growth of 3.4% for FY Business community is involved to boost exports and to reduce unemployment issues.

7 Vietnam The total export amount of textiles has been reduced a little to US$9 billions in The first decline was in 2001, but is likely to grow by US$10.5 billion by 16% in The problems that Vietnam is facing now are wage increases and lack of infrastructure Cambodia Garment exports rose by 11% year on year in the first five months of 2010 Free Trade Union representing 86,000 workers threatened to go on strike unless the Ministry of Labor and the GMAC (Garment Manufacturer Association in Cambodia) agree to raise the monthly min. wage to US$70

8 Textile and Garments Exports to USA (million $) These countries are already exporters. f r o m J a n t ill J u ly C o u n t r y y e a r y e a r y e a r c h a n g e ( % ) C h in a 3 1, , , V it e n a m 5, , , I n d ia 4, , , I n d o n e s ia 4, , , M e x ic o 4, , , B a n g la d e s h 3, , , P a k is t a n 2, , , H o n d u r a s 2, , , C a m b o d ia 1, , , E l S a lv a d o r 1, T h a ila n d 1, I t a ly 1, C a n a d a 1, S r i L a n k a 1, G w a t e m a la 1, P h ilip p in e s 1, E g y p t

9 The potential growth will have to be in a place where labor force is available AFRICA. WHERE?

10 Egypt

11 Why Egypt? Growth & Stability Access & Proximity to Markets Tax Structure Reformist Investment Climate Diversified Economy Political Stability Large Consumer Markets Personal Security Infrastructure

12 Egypt at a Glance... Macroeconomic Indicators: Gross Domestic Product (PPP) (6,000 $/capita) Annual Real Growth Rate (4.7%) Total Exports (24.26 billion $) Total Imports (47.59 billion $) GINI index = 34.4 Composition of Egyptian Exports Foreign Direct Investment FDI (Inwards Stocks Inflows) Labor Force (Age of Population) (25.4 million)

13 Egypt GDP- Composition by Sector Services 49% Agriculture 13% Industry 38% Textiles & RMG sector plays an extremely important role in the Egyptian Economy: Second producing sector after agro-industry First sector in terms of labor force Accounts to 3% of GDP & almost 27% of industrial output Source: CIA World Factbook

14 Gross Domestic Product - GDP Value in Billions USD Egypt s GDP has increased by almost 42% from ( ) Egypt comes 4th after India, Indonesia & Turkey exceeding several countries in the 869 comparison sample India IndonesiaTurkey Egypt PakistanViet NamRomaniaBangladeshHungaryMorocoBulgariaTunisia Jordan GDP Purchasing Power Parity 2005 GDP Purchasing Power Parity 2009 Source: International Monetary Fund (IMF) World Economic Outlook

15 Composition of Egyptian Exports Machinery & vehicles 5% Food Stuff & Beverages 5% Fresh Produce 7% Textiles & Clothing 7% Chemicals, Plastics & Rubber 13% Wood & Furniture 2% 23 USD Billions Live Animals & products 2% Others 1% Fuel & Mineral Products 47% Textiles & Clothing exports represent almost 7% of the total Egyptian exports (1.68 USD Billions out of 23USD Billions) Metals 14% Textiles & Clothing exports represent almost 13% of the total non-petroleum Egyptian exports (1.68 USD Billions out of 12.8 USD Billions) Machinery & vehicles 9% Food Stuff & Beverages 9% Fresh Produce 10% Wood & Furniture 5% Live Animals & products 3% Others 1% 12.8 USD Billions Metals 26% Source: UN Statistics Database Comtrade (values in year 2008) Textiles & Clothing includes HS Chapters from 50 to 63) Textiles & Clothing 13% Chemicals, Plasti Rubber 25%

16 Labor Force Value in Million Jordan 2 Bulgaria 3 Tunisia Hungary Romania M orocco Turkey Egypt Viet Nam Pakistan Bangladesh Indonesia India Total Egyptian labor force amounts to 26 millions representing one of the highest labor force population in the region Source: International Labor Organization ILO (Population from age in 2008)

17 Current & Potential Trade Partners US + Israel (QIZ) EFTA EU 27 Russian Federation MERCOSUR Agadir COMESA Turkey PAFTA Arab Bilaterals Lebanon Syria Iraq Tunisia Morocco - Libya

18 Trade Partners by Agreement Syria FTA Egypt Syria December 1991 PAFTA FTA Algeria Bahrain Egypt Iraq Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia Sudan Syria Tunisia UAE Yemen January 1998 Tunisia FTA Egypt Tunisia March 1999 Lebanon FTA Egypt Lebanon March 1999 Morocco FTA Egypt Morocco April 1999 Jordan FTA Egypt Jordan December 1999 COMESA FTA Burundi Comoros Congo Djibouti Egypt Eritrea Ethiopia Kenya Libya Madagascar Malawi Mauritius Rwanda Seychelles Sudan Swaziland Uganda Zambia - Zimbabwe October 2000 Iraq FTA Egypt Iraq July 2001 EU Association Agreement (EU 27) FTA Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece, Hungary Ireland Italy Latvia Lithuania Luxemburg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden - UK June 2004 QIZ Protocol Egypt Israel United States February 2005 Turkey FTA Egypt Turkey March 2007 Agadir FTA Egypt Morocco Tunisia Jordan March 2007 Libya FTA Egypt Libya April 2007 EFTA FTA Egypt Iceland Liechtenstein Norway Switzerland August 2007

19 Egyptian RMG Exports Over Time Value in Billions USD Egyptian RMG exports grew by almost 69% from ( ) Global Financial Crisis (estimated)2010(estimated)201(estimated)2012(estimated)2013(estimated) Source: General Organization for Import and Export Control GOIEC (HS Chapters )

20 RMG Exports in Comparison Value in Billions USD Egypt is planning to double its RMG exports by Turkey Bangladesh India VietNamIndonesia TunisiaRomaniaPakistanMorocoBulgaria Egypt Hungary Jordan Source: UN Statistics Database - Comtrade RMG Exports based on HS Chapters

21 Egyptian RMG Exports by Trade Partners Turkey 2% P AFTA 1% O thers 4% EF TA 2% EU 27 43% 1.59 USD Billions United States of America 49% Trade Partners Egypt s Market Share 2005 Egypt s Market Share 2008 USA 0.62% 1% EU % 0.49% EFTA 0.11% 0.15% Turkey 0.31% 1.47% PAFTA 0.30% 0.54% Source: UN Statistics Database - Comtrade RMG Exports based on HS Chapters in year 2008

22 Preferential Tariffs & Rules of Origin Trade Agreement Preferential Market Access Rules of Origin Cumulation of Origin Certificate of Origin QIZ 100% tariff reduction At least 35% value added ex-works price (where at least 10.5% Israeli component) Bilateral/ Diagonal allowed QIZ Certificate EU 27 + Turkey + Agadir + EFTA 100% tariff reduction Manufactured from originating/egyptian Fabrics Bilateral/ Diagonal allowed (PAN-EUR-Zone) EUR.1/ EUR-MED Certificate of Origin PAFTA & Arab Bilaterals 100% tariff reduction At least 40% value added ex-works cost Bilateral/ Diagonal allowed Arab League Certificate of Origin COMESA 80% - 100% tariff reduction At least 45% value added ex-works cost Bilateral/ Diagonal allowed COMESA Certificate of Origin

23 Year 2009 QIZ Top 10 US Importers value (million $) LEVI STRAUSS & CO. GAP.INC CALVIN KLEIN J C PENNEY MACY'S PHILLIPS VAN HEUSE N TARGET STORE S JON ES APPARE L W ALMART GLORIA Source: QIZ Unit Ministry of Trade & Industry

24 Average Labor Cost in RMG Sector USD per month Textiles & RMG industry is labor intensive Labor cost in Egypt is among the most competitive and stable in the region, growing at 5% - 10% annually JordanHungary TurkeyBulgariaMoroco TunisiaRomania Egypt India PakistanIndonesiaVietnamBangladesh Source: International Labor Organization ILO (year 2008)

25 GDP distribution in Egypt Gini index = A/(A+B) GDP (%) A B population (%)

26 From the previous graph and in absolute value (using purchasing power parity) : The GDP per capita of the poorest 10% Egyptian persons is = 2,085 $ The GDP per capita of the richest 10% Egyptian person is = 14,754 $

27 Conclusion Egypt is in line with the list of countries in terms of : Age structure segmentation ( ready pool for future labor ) Unemployment rate ( ready pool for future labor ) Low wage structure On the other hand, Egypt is in privileged by the following: Political Stability vs. Pakistan & Cambodia Proximity to Europe ( lead time to delivery ) Free Trade Agreement with: USA Europe Turkey Pan Arab

28 Sources Supplier Council Presentations /0,,menuPK:287166~pagePK:141132~piPK:141107~theSitePK:256307,00.html

29 Thank you