Kenya’s Apparel Ambitions

Kenya has seen its apparel industry boom since AGOA took effect in 2000. Here’s how it’s bracing for the WTO quota drop in 2005.

NEW YORK — “You don’t put a flyweight and a heavyweight in the ring and say, ‘Let’s have a fair fight.’”

This story first appeared in the May 27, 2003 issue of WWD.  Subscribe Today.

Mukhisa Kituyi, Kenya’s minister for trade and industry, turned to this boxing metaphor when he tried to describe the competitive threat his country and other African nations will be staring down at the end of 2004, if nothing is done to amend current trade packages.

Since the African Growth & Opportunity Act took effect in 2000, Kenya has seen tremendous growth in its apparel-manufacturing industry, which today employs about 30,000 people and last year saw its shipments of textiles and apparel to the U.S. shoot up 94.6 percent to $125.9 million.

Along with the rest of the world, Kenya is bracing for Dec. 31, 2004, when the 146 nations of the World Trade Organization will drop quotas on textiles and apparel. But, with its sub-Saharan African neighbors, Kenya is also bracing for another deadline, Sept. 30, 2004, when the provision of AGOA that allows lesser-developed African nations to use fabric made in countries outside of the beneficiary region, including China, in garments that still qualify to enter the U.S. free of duties and quotas.

During a stop in New York last week, Kituyi said that confluence of events could be “very harmful” to the economy of Kenya, as well as to other African nations.

While he said he applauded and shared the goal of free trade, he said that if leaders in Washington and Geneva want the changes in African economies that have come about since AGOA’s passage to hold, something has to give.

“We were always aware that AGOA is not like the sugar quotas that gave us 50 years of preferred market access,” he said. “We always saw AGOA not just as an opportunity to access a market, but also as a wake-up call to come to speed in a competitive global liberalized economy. We are seeing AGOA as giving us an opportunity to quickly work on capacity and competitiveness, quality responsiveness to market requirements.”

That’s why Kenya is lobbying the Bush administration to extend the third-party fabric provision of AGOA through 2008 and lending its weight to a new effort in the WTO to extend the quota phaseout process.

“You have to balance the principle of trade liberalization with the principles of developing capacity to adequately benefit from trade liberalization as an international agenda,” he explained.

The effects of the apparel industry’s growth on Kenya’s economy have been pronounced, Kituyi said. Since AGOA took effect, its employment base has almost quadrupled to 30,000 from 8,000. Kituyi also said the industry is expecting its exports to almost double this year to about $250 million.

To many American executives, that number sounds like small potatoes — Liz Claiborne Inc., for instance, sold more merchandise than that each month last year. But in Kenya, on average each person with a full-time formal job supports about nine other people, which means the industry is supporting about 300,000 Kenyans by Kituyi’s estimate. Kenya’s population is 31.1 million, according to U.S. government data.

“This is the fastest-growing source of formal employment in the entire economy,” he said, adding that Kenya’s nascent manufacturing industry contributes 14 percent of the country’s $9.8 billion gross domestic product.

Kituyi said his eventual goal is for Kenya to create an entirely vertical textile and apparel industry, going all the way from growing the cotton to finishing garments. To that end, earlier on his trip through the U.S. he made stops in Alabama and Georgia to inquire about acquiring idle cotton ginning equipment.

But he said that vertical extension of the industry “cannot be completed” before 2005, and that’s why he wants the third-party provision extended.

That measure is not uniformly supported in Africa, though. Particularly in the more-developed nations of South Africa and Mauritius, government officials and industry executives have argued that encouraging the importation of fabric is discouraging new investment in textile plants.

Importers have acknowledged that they will see little reason to ship Asian fabric to Africa to be cut and sewn for the U.S. market in 2005 if the quotas are dropped. Sewing plants are much more mobile than textile mills, which raises the danger that the investments that have flowed into Kenya over the past two years could just as quickly flow out.

That conundrum leaves Kituyi and others to consider if they will lose access to an industry that’s proved a powerful economic development tool for many countries.

“We are not an industrial country and we need to start on this path,” said Jaswinder Bedi, a Kenyan industry executive and head of the Kenya Association of Manufacturers, who was traveling with Kituyi. “We cannot reinvent the wheel. We need to start with textiles and apparel. The rest of this world has already used that tool to their advantage. To tell us, ‘In two years time you have got to be ready for the quota-free regime,’ it’s very unfair to Africa in general.”

Kituyi said the U.S. and other governments participating in the WTO should consider what their ultimate goals are for the trade regime.

He pointed out that African nations have suffered economically for social instability. Extended social unrest after a disputed presidential election last year in Madagascar caused many apparel companies to pull out, causing its exports to drop by almost half.

Kituyi said that creating an economically stable Africa by allowing it to develop a garment industry, will enable the continent to handle many of the crises that have in recent decades caused it to seek foreign aid, like the current problems caused by the wide spread of AIDS.

“A lot of the chaos that you’ve seen in many of the African countries have been associated with uncertainties of an economic nature, competition for limited resources,” he said. “And what trade does is to add to the capacity for governments to create modern societies, to create a transition and capacity for resolving conflict without destroying society.”