Ø15 years of Contribution of AGOA to the Mauritian Economy:
Mauritius had been one of the most ardent proponents of AGOA during the time when it was being designed and had played a critical role on its adoption by the US Congress. It was convinced that AGOA would give a significant boost to our exports on the US market, for the Textile & Apparel sector. The African Growth and Opportunity Act (AGOA) was signed into law into May 2000 to stimulate economic growth, to promote a high-level dialogue on trade and investment-related issues, to encourage economic integration, and to facilitate integration of SSA Countries into the global economy.
By virtue of the duty-free/quota-free access for some 1800 additional products the US market, AGOA created the opportunity to diversify our exports andto further develop the Textile & Apparel sector.
As a matter of factwhile the T&A sector has benefitted mostly from the AGOA, has alsoit also led to the exports of other products such as seafood, jewellery, plastics and medical devices to the USA.
The contribution of AGOA to the Mauritian Economy can be analyzed in three phases. While the first and the last phase has had a positive contribution to the economy, the second phase was a difficult period marked by drop in exports, closures of companies and loss of jobs. But yet, it paved the way for an improved export performance ahead.
1.Phase 1,2000-2002: “Lueur d’espoir”
Mauritius witnessed a significant increase in T&A exports to US market following the coming into force of AGOA in the year 2000. Exports to USA grew by more than 22% from Rs 7,715 million in 2000 to Rs 9,481 million in 2002.
Furthermore, the T&A sector economically gained in the following ways:
Setting up of spinning mills:
ØIt led to the setting up of 3 cotton spinning mills; Tianli, CMT Spinning Mills and FM Denimin Mauritius in 2003 and 2004 respectively, with total investment amounting to someUSD170 million.
ØIt generated additional jobs for more than 1000 people.
(i)Structure of T&A sector reinforced:
ØDevelopment of a vertically integrated T&A sector with production of almost one third of cotton yarn requirement of the country
ØLocal production of high quality yarn and fabrics
ØThe spinning of cotton yarn in Mauritius enabled the full utilization of installed capacity in knitting, dyeing and finishing sectors.
ØIt led to greater flexibility in terms of compliance, shorter lead time and faster customer responsiveness
ØRegional Trade with African countries picked up in terms of regional sourcing of raw materials
ØSourcing of cotton from Madagascar, Tanzania and Mozambique and accessories from South Africa
ØEmergence of the delocalization process:
Mauritian investors were at the root of the emerging T&A export oriented industry in Madagascar since 1990.
-labour intensive production was shifted from Mauritius to the region to benefit from cheaper labour costs
-Mauritius also gained in terms of revenue through the offshore operations.
1.Phase 2: 2002-2008 – Difficult Period
ØThe first two years of increase was followed by a long period of constant and successive drop in our exports from 2002-2008.
ØThis period (2002-2008) saw the closure of almost all Hong-Kong Based Companies with significant loss of jobs, mainly due to:
(i)Dismantling of the Multi fiber Agreement (MFA) in 2005
-Exports to USA dropped significantly by more than 52% from Rs 7,136 million in 2004 to Rs 3,142 in 2008
-It resulted in nearly 10000job losses
(ii)The Non-LDC status of Mauritius which excluded the country to benefit from the third country fabric derogationwas not in favor of the country and discouraged new investors to come in.
-The T&A operators were restricted in terms of raw materials as most materials were sourced from the region and it was mainly cotton based.
-It limited the variety of products to be offered to clients.
-It also led to reduction in the competitiveness of Mauritian products since Mauritius incurred higher cost of productions. The costs of raw materials from Asia was 40% lower.
2.Phase 3: 2008-2013 – Re –Emergence of Exports to USA
Mauritius was granted the benefit of theThird Country Fabrics provision in September 2008 and from 2010 onwards, our exports to USA started to pick up significantly and it has since maintained an upward trend till now.
-Exports to US grew by nearly 95% from Rs 3,462 million in 2008 to Rs 6,746 million in 2013.
-The panoply of products offered to buyers expanded considerably from cotton to synthetic fibers as there were no restriction in sourcing of raw materials
-Medium and small companies started to export to USA; they generated additional export turnover of around Rs 119 million
-It led to the setting up of three additional T&A production units in Mauritius.
-With the renewal of the third country fabric provision, investment increased by more than Rs 150 million from 2008-2013.
-From 2008 to 2012, 5000 additional people were employed in the T&A sector
-Exports of Synthetic products increased considerably with the possibility to source raw materials (yarn and fabrics) from anywhere in the world.
-More recent figures show that Mauritian exports to USA registered an increase of more than 17% in the first quarter 2014 (Jan-Apr) as compared to same period in 2013.
ØPerformance of other non-textile products:
Mauritian operators have diversified the range of products offered to US buyers:
·In 2013, exports of new products to the USA generated additional turnover of around Rs 3,208 million, representing around43% of the total exports to USA.
·Other emerging products of exports are:
-Seafood Products (fish Fillets/Preserved Tuna), Sunglasses, Special sugar, Live animals (Monkeys), Leather &Cereals
-Exports of seafood to USA increased by 31% in 2013 as compared to 2012
Summary of the impact of AGOA on Mauritian Economy from 2008-2013
·Exports to US grew by nearly 95% between 2008 and 2013 from Rs 3,462 million to Rs 6,746 million out of which exports of non-cotton products in 2013 represented around 10 % of total exports.
·Additional job creation for more than 5000 employees
·Further investment of around Rs 500 million in the T&A sector
·Stronger T&A sector through vertical integration, providing quicker response to customers’ needs and strengthening competitiveness vis a vis buyers.
·Product diversification: Exports of non-textile products such as jewellery, seafood and light engineering products represents around 43% of total exports to USA in 2013.
2.To sum up, Mauritius is the perfect case to show that the third country of AGOA is essential for the development of a strong competitive T&A sector, generating additional jobs and revenue for the industry.
3.While the Non-LDC status propelled the Mauritian T&A sector towards being vertically integrated and regionally integrated, yet the non-LDC status could not help the country to keep competition vis a vis low cost producing country such as China during the period 2002-2008.
4.The Third Country Fabric Provision is a must for the development of the T&A sector in Mauritius for the following reasons:
The T&A sector is more and more fashion-oriented. This requires innovation and creativity in terms of technology and raw materials as well. And Africa has got a limited variety of raw materials
ØPrice remains the most important factor for the buyer.
5.The risk of non-renewal of the Third country fabric provision of Mauritius will be as follows:
ØDrop in T&C exports by more than Rs 4 billion.
ØLoss of around 8000 jobs: With increase in cost of productions and significant decrease in revenue, companies are most likely to downsize which would lead to potential loss of approximately 8000 jobs.
ØDisinvestment: Investment made by factories to the amount of around Rs 500 million will most likely be jeopardized by the non-renewal of the LDC status.
ØSMEs: Closures of the SMEs will be most probableas they will inevitably lose their orders in case the Third country fabric provision is not renewed.
Why do we need a seamless Extension of AGOA for another 15 years?
AGOA as a catalyst for the economic boom of Africa
ØAfrica is growing at a rapid pace:
-Focus is on Africa and AGOA will allow for the economic development of Africa through the development of its T&A sector
-Growing countries like Ethiopia is attracting potential investment of around USD 900 million in the T&A sector
-Kenya and Tanzania are also picking up in terms of T&A exports to USA
-Buyers are coming back to the Regional Countries: with the recent event in Bangladesh, rising costs of production from strong Asian countries like China and the emerging local T&A market eroding India, the buyers have no other options than switching to other suppliers. And AFRICA is the emerging sourcing destination.
Africa is full of Resources:
-Africa is not only rich in human resource, but also in raw materials.
-Africa is one of the finest cotton producing continent in the world
-Africa is expected to reach a youth population of 1.2 billion in 2020.
-Africa has got all the components to develop into a strong T&A sector.