JERUSALEM — For the major textile companies in Israel, exports are the core of their business, so despite the Hamas rockets falling in the country’s south and the Israeli military response in the Gaza Strip, business in the region marches on.
This story first appeared in the January 13, 2009 issue of WWD. Subscribe Today.
The town of Kiryat Gat — home to the headquarters of Bagir Ltd., makers of technologically innovative men’s and women’s suits, as well as an Intel factory for computer chips — is just 15 miles east of Gaza, but the current military action against Gaza-based Hamas has had no impact on Bagir or its operations, said Moshe Gadot, the company’s global development and marketing director.
“I’m here in Kiryat Gat, and you’re talking to me and everything’s fine,” said Gadot, adding the firm recently conducted a drill for entering a bomb shelter, as a precautionary measure.
It was only last week that Kiryat Gat residents received pamphlets from the municipality about what to do in the event of a rocket attack from Gaza. Israeli troops began their ground and air offensive Dec. 27, after the end of a cease-fire brought a fresh round of Hamas rocket attacks from Gaza on neighboring Israeli towns. Western powers are pushing both sides for a cease-fire in the conflict, which so far has seen almost 900 Palestinians and 13 Israelis killed.
Built as a development town in Israel’s southern region in the Fifties to absorb North African immigrants, Kiryat Gat’s economy was initially based on processing the local agricultural produce, which was cotton and wool.
Israel’s Polgat textile company factory was the main employer in the town until it closed in the late Nineties, leaving its sister company, Bagir, behind. At that time, Polgat moved its manufacturing facilities to China, and Bagir kept its offices in Kiryat Gat, while shifting manufacturing facilities to nearby Jordan and Egypt, like other textile companies in Israel.
“Our manufacturing isn’t in Israel any longer,” Gadot said. “We manufacture in Egypt, Jordan and China, and our ties to our employees there are long term, without any political influence. We’ve gone through a lot together. We have forged our own kind of cooperation through economic ties.”
While there had been major discussions at one time of building Israeli textile factories in or near the Gaza Strip in order to employ Palestinians and forge better economic relations, those plans never came to fruition, partially due to the onset of the second intifada in 2000. Instead, these companies narrowed local manufacturing, due to the high costs of employing Israelis, and looked around the Middle East, settling on opening factories in the neighboring countries of Jordan and Egypt.
For the year ended Oct. 31, Israel shipped 433.9 million square meter equivalents of textiles and apparel to the U.S., a 9.5 percent increase. The vast majority of that, 392.9 million SME, was textiles. Apparel shipments declined, but of the categories shipped, the highest volume was in cotton and man-made fiber underwear and women’s and girls’ knit blouses. Sheets and towels were also shipped in significant amounts.
The U.S.-Israel Free Trade Area Agreement went into effect in September 1985, the first bilateral free trade deal ever signed by the U.S. Under the terms of the agreement, qualifying goods, including textiles and apparel manufactured in Israel, the West Bank, the Gaza Strip or a Qualifying Industrial Zone and shipped directly to the U.S., are duty free. To qualify for duty-free benefits, merchandise has to be wholly grown, produced or manufactured in the territories covered by the agreement, or it must be substantially altered there. A small percentage of materials produced in the U.S. can also be used in merchandise.
The U.S. also has a seven-year-old free trade agreement with Jordan. It mandates that at the end of a 10-year implementation period, all goods manufactured in Jordan and shipped directly to the U.S. will be duty free. The Jordan FTA has strict rule-of-origin requirements for textiles and apparel that require substantial portions of production of components and garments take place in the U.S. or Jordan.
Bagir now has 200 employees in Kiryat Gat, and 2,700 around the world. Despite political tensions between Israel, Jordan and Egypt over the current situation in Gaza, Bagir executives have continued to make business trips to Jordan and Egypt.
It’s a similar situation at other Israeli textile companies that manufacture goods in Jordan and Egypt. Delta Galil, the private label intimate apparel maker, has its headquarters in northern Israel, where it employs some 200 Israeli Arabs among a total of 600 workers.
Even with the ongoing tensions in the Arab Israeli community in Israel over the Gaza action, Delta is “a kind of utopia,” said Esti Maoz, the company’s chief marketing officer.
Delta also directly employs 4,000 people in Egypt and through subcontractors works with 10,000 Egyptians, with another 400 employees in Jordan.
“We have factories in Egypt and Jordan. Our people are going there as usual,” said Maoz. “But the Egyptians are not such big fans of Hamas, and even though Jordan is 70 percent Palestinian, nothing has occurred in our factories.”