Fiji’s once-thriving textiles, clothing and footwear (TCF) industry is showing strong signs of recovery, with some 8,000 people employed in the sector and $110 million of exports expected in 2015. Kaushik Kumar, Managing Director of the flagship TCF company United Apparel, explains how Fiji is able to punch above its weight in a globally competitive sector, and how his company refuses to compromise quality over quantity.
What is the impact of the infrastructure upgrades, such as the airport renovations and large-scale roadworks under way, on major manufacturers and exporters in the textiles, clothing and footwear (TCF) industry?
When people see these sorts of infrastructure developments happening in the country, it’s definitely a positive sign. First of all it provides a lot of encouragement for people looking at investing in Fiji.
As far as the TCF sector is concerned, we can transport our produce around the country more easily and enhanced airport infrastructure means the possibility of more freight capacity to our main markets.
The country has also adopted a bold trade policy framework aimed at enhancing the reach and reputation of Fijian-made produce around the world, whilst the Ministry of Industry & Trade is doing much to promote the ‘Made in Fiji’ brand. How do you assess the effectiveness of these policy initiatives and their potential to help Fiji significantly enhance the volume of its exports?
Fiji has enjoyed good branding. Originally people just thought Fiji was a nice holiday destination. When they actually come out and see what Fiji produces, it is certainly an eye-opener. When we start having promotions such as Fijian Made, it does have quite an impact, even more so when a tourist walks into a shop. They’re here to buy local products; we really don’t want them to walk into a retail store and buy a T-shirt that is made in China. With the promotion of Fijian Made and Fijian Sewn branding, the likelihood of the tourist buying the Fijian-made product is definitely higher than the imported one.
Our sector has been supporting the Fijian Made campaign, and very soon Fijian Sewn branding is going to be launched.
You are the Chairman of the TCF Council. Traditional competition for the Fijian TCF industry comes from Asia. What are the competitive advantages of the Fijian TCF industry that allow you to compete on a regional and even global level?
Our industry started in the early 1980s with a handful of local players involved in exports. The economy came to a standstill after the 1987 coup, but then a tax-free scheme was introduced which encouraged foreign investors and local investors to invest in new factories and boost exports. That led to an influx of foreign investors especially in the TCF sector. One of the driving forces at that stage was our market access into Australia under the SPARTECA agreement. We had duty-free access provided we met a 50% local content rule, which was easy to meet in those days, because Australia had a textile industry.
We also had a huge advantage in the late 1980s and early 1990s when the tariffs in Australia and New Zealand on garments were over 50% and import quotas were in place. Products coming out of our current competitors faced very high tariffs by comparison. We saw quite a big boom between the late 1980s right up to the mid-90s, when the garment industry went from a handful of operators to over 100 factories. If I recall correctly, we grew from an employment base of 3,000 to 18,000 employees, with exports reaching $450 million. The USA had become the largest export market for Fiji garments as we also had preferences in the US market under the GSP agreement, giving us quota-free access.
We have access to an English-speaking workforce which can be trained quite easily, and you really don’t need to be educated or have a very high level of skill to be able to sit on a sewing machine and learn how to sew.
The turning point came after the year 2000 when we had another coup. There were union bans on handling products that scared away a lot of our buyers. At the same time, Asia was emerging as the new base for garment manufacturing, particularly China and Indonesia at that stage. We lost many of our volume buyers to those two countries. It was the ‘perfect storm’ and it didn’t take too long for the industry to start collapsing.
Around the same time, the quotas in the US were abolished or phased out and a lot of foreign investors moved elsewhere as they could no longer take advantage of our preferential access. The industry plunged down to a very low level of employment. We were back to the drawing board as to what should be done.
Some seven or eight years ago we had an industrial adjustment aid package that was funded by the Australian government under AusAID. They helped us restructure the industry, finding out where our strengths lay, as we could no longer compete with the Asian countries on price. All the volume was ending up in Asia and we were left with small runs. We were expected to provide a quick turnaround, and a lot of factories found it very difficult to adjust to that.
The Australian-funded training program ran for three years, and a lot of factories joined that program. Though we had about 40 factories, a number of them fell away because they could not cope up with the requirements of the program. Around 12 or 13 factories completed the full three years and we were told what our strengths were. One strength was that we’re very close to our main markets of Australia and New Zealand, so no matter what, the demand will always be there because of our shorter lead times. The other strength we had was our ability to do small runs. We just had to change our mind-set, and forget about those orders that used to be 3,000 units, 4,000 units, 10,000 units; they were gone. What were available to us were 100 units, 200 units, and 500 units, so we had to readjust our production lines to be able to handle small runs and provide a quick turnaround.
Not everyone has the ability to buy volume and not everyone wanted to go up to Asia and forward book for six to nine months, while in Fiji you could pop in, have your fabrics here, place an order and have your garments delivered within four to six weeks. That continues to be our advantage: being able to do small runs and provide a quick turnaround.
For Australia and New Zealand, we have the advantage of speaking the same language and being in the same time zone. The freighting is very easy, as we have flights to Australia and New Zealand every day. Because most of the factories do small orders and small runs, the majority of our goods go by air freight.
In summary, our core strengths are good communication, the ability to do small runs, and flexibility with deliveries. Yes we’re certainly a little bit more expensive than our Asian competitors but these three core strengths make up for that little surcharges that we put on.
Aside from Australia and New Zealand, the TCF council has attended some trade fairs in the US. Do you see any potential for recovery in exports to the US?
That was a couple of years ago. We went to Magic in Las Vegas just to test the waters once again as to how receptive the market was to Fiji, but we then realized that our preference under GSP was not available anymore. I think it’s something to do with the way the American system works. The whole of the GSP is on hold, so we do not have any preference into America, whereas you’ve got the African nations, and some of the Latin American and LDC countries who have their products entering duty free, so price wise we were not competitive.
We still have some exports to America. It’s not a lot but I believe there are some niche products like winter woolskin products, and some rugby jerseys, but it’s not in huge volumes. I think unless the market access improves, it’ll be hard to penetrate the US market.
The Fiji Fashion Council also attended Los Angeles fashion week, and the feedback was that some of the range that they took over with them was received quite well. We are trying to find some synergies between the fashion industry and the garment manufacturing industry, to see how we can link together and help each other grow. I made some samples for some fashion designers, and once I meet them we’ll know if they were received well in terms of designs and workmanship, and if the pricing makes it viable to start producing more for the US. Maybe high value fashion apparel could be a niche for us over there. We may not be able to compete on the high volume, low priced products, but maybe if its low volume, high priced we may have a chance.
At the moment some 8,000 people are employed in Fiji’s TCF sector and export figures for 2015 are expected to reach $110 million. What are your expectations for growth in 2016 and beyond?
Over the last three years we’ve had steady growth. I wouldn’t say it has been rapid, but it has been steady. We previously had somewhere between 4,500 to 5,000 people employed, so we can say that over the last five years some 3,000 additional jobs have been created.
Speaking to my colleagues in the industry, the order books look pretty full, and everyone seems to be very optimistic. 2016 does look pretty good. I know there are a couple of factories that have big expansion plans. If I talk about United Apparel, we’re looking for another 100 workers. I’m also on the verge of ordering another 70 machines. We’re very optimistic that the employment numbers will increase. Our target is to get back to 18,000 employees across the sector, and $500 million of exports. We’ve just got to go out and market ourselves.
The Bainimarama government has been extremely helpful. They stepped in at a time when the industry was at its lowest ebb and we managed to secure a marketing grant under the national export strategy, which is $100,000 a year. This is used to promote the TCF industry. This is how we participated at the trade fair in America. We’ve also been going to the international sourcing fair in Australia for six years. It helps to be out there and show the market that Fiji still has a vibrant and a viable clothing manufacturing industry.
As I said, the perception is that Fiji is only a holiday destination. Whilst in Australia and New Zealand we are known for our garment industry, in other parts of the world they’re not aware that Fiji actually produces garments.
United Apparel has won six Prime Minister’s Exporter Awards over recent years. Where do you see most potential for growth in your export markets?
Our growth is coming from the Pacific Island markets: Papua New Guinea, Vanuatu, and Samoa; we’ve already secured some orders. We now have a marketing representative who travels up to Papua New Guinea two or three times a year. We have linked up with a company in PNG to market our products. I’m optimistic that this emerging market has a lot of opportunities for us.
How does United Apparel distinguish itself from your competitors locally?
I think we’re still one of the largest manufacturers in the country. I believe our plant is still a benchmark in the industry. When it was set up 18 years ago, it was a benchmark in the Pacific. There were no factories that existed with this sort of a set up.
The TCF industry employs a large proportion of women. How do you ensure your working environment is inclusive and women feel empowered?
We depend on women, without them we won’t have this business. Some 70% of our workforce is made up of women. We have some rules in place as far as empowering women is concerned, and we are also very tough on sexual harassment I’m very strict about that and there’s a zero tolerance policy in place.
We’re also encouraging a lot of women within the factory to start taking up supervisory positions. As of last year we started an in-house training program to help support this objective.
You have been with United Apparel for some 30 years. What are your personal targets over the next five years?
We have had our highs and lows but we’re growing. I think we’re heading for steady growth. I definitely don’t see a decline. Any growth will be controlled and managed, especially bearing in mind that we do have a shortfall of skilled labor. In our industry sometimes rapid growth is not good because once you get the numbers again, quality suffers, and in our case quality is prime. This company is very well known for its quality products and services. We will not compromise on quality for volume.
Finally, we would like to invite you give a final message to our international readers about the potential of Fiji.
Fiji is going through its best phase since independence. The economy is booming, the country is modernizing, infrastructure developments are taking place… everything is happening. This is the place to be, so don’t miss out.