By Quentin Wray
Singapore – The national treasury has sounded a warning to clothing manufacturers to use the breathing space given by the temporary caps on Chinese imports to become competitive \”or risk disappearing as a serious player\”.
Speaking last week on the sidelines of the annual meetings of the International Monetary Fund and World Bank, Lesetja Kganyago, the treasury director-general, said the quotas, which will see limitations of imports of Chinese clothing and textiles from January, were a necessary industrial policy intervention and not a change in economic policy.
He justified the move, saying that \”what we are seeing with the clothing manufacturers is a tragedy … the manufacturing base completely eroded\”.
That this was happening in the middle of a consumer boom, when sales of semidurable goods such as clothing are doing so well, \”says something is not working in industrial policy and that we need an … intervention\”.
But he warned that quotas alone would not be enough to save the sector and that firms would have to use the opportunity to invest in capital equipment, technology and training. If at the end of it, manufacturers were still uncompetitive, then \”tough luck\”, Kganyago said.
While the government and trade unions have claimed that the quotas would create thousands of jobs, retailers have said they would merely force prices higher, encourage imports from other Asian nations and lead to increases in smuggling. Kganyago dismissed the outcry as bordering on hysteria.
A recent report by investment house Merrill Lynch, however, said that the clothing retailers it had spoken to indicated that they were likely to shift supply bases to other cheap locations, such as Bangladesh, Indonesia and Vietnam.
Although these places are more expensive than China, prices were only expected to increase by an average of about 5 percent because of the quotas.