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Tunisia textile sector holds promiseThursday, September 25, 2014 > 09:52:49
Tunisia's wage-intensive textile industry deserves special focus as part of government efforts to revive the economy as the North African state transitions to democracy following the 2011 uprising.
The country's garment, textiles and leather sector, which currently accounts for a quarter of Tunisia's exports and 9% of employment, has suffered in recent years partly due to the economic slowdown but primarily because of competition from Chinese and Indian goods.
The World Bank said Tunisia had a competitive advantage in several export goods, particularly for yarn of regenerated fibres, synthetic fabrics and carpets.
"This reflects the fact that wages in the textile sector have increased in benchmark countries and other textile exporters -- and this may open a window of opportunity for Tunisia," it said in a report on key growth opportunities in the North African country.
Apart from generating export revenues, the textile industry is also very labour-intensive which is crucial for Tunisia which has an unemployment rate of 15.3%. Around 280,000 low-skilled workers, primarily women, are employed across 1,860 textile and clothing companies.
Tunisia's proximity to the European Union also gives it a competitive edge. Europe accounted for 95% of textile and clothing exports in 2012, worth USD 2.76 billion, according to Tunisia's Foreign Investment Promotion Agency (FIPA).
Unlike importers from the United States which typically demand large standardized apparels, EU clients tend to order small batches of customized garments.
"Responding quickly to changes in client demand, reducing time of production and increasing reliability of exports will be critical in order to meet expectations of EU clients. More standardized apparel articles, however, will probably face fierce competition from Asian countries," the World Bank said.
A number of international brands including Calvin Klein, Benetton, Gap and Yves Saint-Laurent are known to have chosen Tunisia for outsourcing purposes, according to latest available information from FIPA.
International companies, primarily from Europe, invested USD 24.5 million in Tunisia's clothing sector last year - less than half the figure it secured in 2009.
Tunisia's textile sector is equipped to attract more foreign investment.
Tunisia has a free trade agreement with the European Union since 2008, apart from trade agreements with Turkey, Egypt, Jordan and Morocco, which should facilitate cheaper access to raw materials for the textile and leather industry.
Monastir-El Fejja, an industrial park dedicated to textile and clothing, features a business incubator, a center for technological resources, a fashion institute and industrial area.
The country is also looking to groom the next generation of textile workers through the Higher Institute of Technological Studies of Ksar Hellal, an institute of textiles industries for higher technicians and an institute for fashion specialists.
Although Tunisia produces only a few leather products, the sector accounts for just over 1% of employment, with most jobs in cutting and assembly as most raw material is imported from Morocco.
"Tunisia holds potential in several products in the textile and garments and leather and footwear sectors and to expand exports in the mechanical and electrical industries," the World Bank notes.
"For several of these products global demand has been consistently growing during the past decade. The challenge, however, is ensuring that firms in these sectors can climb up the value added ladder and increasingly become competitive in the higher-value added segments of the production chain."
Since the 2011 uprising, Tunisia has moved toward full democracy with parliamentary polls scheduled to be held on October 26 and presidential elections in November.
The International Monetary Fund has urged the Tunisian government to design and implement new investment facilitation measures quickly to spur economic activity, which has been timid with GDP growth of 2.3% last year and 2.2% in the first quarter of 2014.
The IMF said the government should avoid introducing tax incentives, which would not be conducive to creating a more level playing field for investors.
Jobless rate climbed to 18.9% during the Arab Spring revolution of 2011, but the figure has climbed down as the public sector absorbed 70,000 new job entrants to stave off social unrest.
However, that has led to a bloated public sector and a wage bill that accounts for 12.5% of GDP. The long term solution is to focus on sectors that can create jobs and benefit the wider economy.