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Material Gains for Textile Companies

Global Arab Network - The Middle East Association

Wednesday, 29 July 2009 21:38

As the manufacturing sectors of the Middle East and North Africa region become increasingly intermeshed with markets in the rest of the world, opportunities are opening up for exporters operating within the region, writes Ian Lewis...

Gulf states have put in place extensive measures to encourage manufacturers to set up in the region with a view to serving domestic, regional and global markets. The creation of a benign investment environment in the UAE, for example, is starting to reap dividends.

When Low and Bonar, the UK-based technical textiles group, were looking for a base in the Middle East for artificial grass yarns production, it chose Abu Dhabi. Easy access to polymers - oil-derived materials used in the manufacturing process - was a major consideration, as were the availability of low-cost labour and generous tax breaks.

The opportunity to work in tandem with a local business was also important. Rather than opting to open a facility in a free zone, the company preferred to forge a joint venture with Abu Dhabi Basic Industries Corporation.

"Given that we have a strategic intention to create a long-term and sustainable presence in the Middle East, we were also looking to bring a partner on board who knew the region very well. That's why we didn't simply set up in a free trade zone," says Robin Stopford, group head of strategy at Low and Bonar.

The plant will be the first to be built at the new Abu Dhabi Polymers Park, an industry-specific economic zone where Low and Bonar will be the anchor tenant. It is scheduled to open in 2009, when it will start exporting to the company's existing markets around the world, while providing a boost to the use of artificial grass in a region where the use of heavily irrigated natural grass is a hot topic. The initial investment in the joint venture required to set up the business and its production facilities is estimated at around $25 million. Low and Bonar put in $6 million in 2008.

Stopford says the company is keeping an open mind about where it will expand its business. "This is our first investment in the region. We hope to learn a lot from it on how the region works and how and where best to operate," he says.

Future investment will not be restricted to grass yarns. The firm already imports other technical textiles, used in civil engineering and construction, into the Middle East from its factories around the world, and is hopeful that it can bring manufacturing of some of these products into the region in coming years.

Strong fabric

The non-artificial textiles industry in Turkey and the countries of North Africa is also benefiting from improved investment and trade terms. The indigenous industry has long been able to call on the advantages of considerable expertise, an extensive manufacturing infrastructure and a low-cost business environment to export into the huge European and North American markets.

Now, the implementation of agreements freeing up trade with several countries in the Middle East and North Africa region is helping to transform the trade environment. Major textiles producers such as Egypt, Morocco, Tunisia and Turkey have agreements in place with the EU and are also signing up for free trade deals among themselves. The Euro-Mediterranean Partnership (EuroMed) process, which aims - among other objectives - to foster the development of economic and trade ties between the EU, North Africa, the Levantine countries, Turkey and Albania, is providing crucial support for all manufacturing sectors.

Total trade between the EU and its EuroMed partners was €127 billion in 2007, around 5 per cent of total EU external trade. Exports to the EU from its EuroMed partners have grown by an average 10 per cent a year since 2000, while imports going the other way have increased by 4 per cent since 2000, according to European Commission data.

The textiles sector has been among the best-positioned industries to capitalise on the greater fluidity in trade. In 2007, Turkey was the second biggest supplier of textiles to the EU after China; its exports to the bloc rising 6.5 per cent in the year, according to the Paris-based EuroMed Centre of Textile and Clothing Managers. Tunisia, the fifth biggest supplier to the EU, showed a 5 per cent rise in exports to the EU, and Morocco, the sixth biggest supplier, showed a 6.4 per cent export rise. Egypt was the EU's 16th largest textiles supplier.

Many of the elements designed to create a EuroMed free trade area by 2010 are now in place, through the introduction of European rules of origin for textiles and clothing, implemented from 2005 onwards, in advance of the creation of a complete EuroMed system. Of the North African countries, Tunisia has gone furthest down the road to removing trade barriers in most industries, with Morocco and Egypt not far behind.

These countries may still have some way to go to catch up with the share of Western markets that their Asian counterparts can claim, but they are in increasingly good shape to take up the challenge.

Global Arab Network

This article was first published in Business Focus (Issue 2, 2009), a Middle East Association publication produced by Newsdesk Media Ltd.

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Last Updated on Saturday, 15 May 2010 22:04

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