The Hindu Business Line : Garment exporters rerouting delivery via quota countries

INNOVATION is the key for the Indian garment exporter. Sample these two cases. Due to non-availability of quotas, a mid-sized Bhiwani-based apparel exporter is forced to send his finished consignment of readymade ladies shirts to Dubai, instead of despatching it directly to his customer — retail giant J.C. Penny in the US. In Dubai, a cursory washing of the consignment takes place and the intermediary puts a `made in UAE' label on the items. Following this, the consignment is finally despatched to the US customer from Dubai.

Similarly, an Indian exporter, with a full-fledged manufacturing base in Noida is forced to establish a parallel set-up in Bangladesh to export to the US due to availability of quotas. A substantial quantity of the consignments from his Indian unit is sent to the Bangladesh unit, from where it is ultimately despatched to his clients in the EU and Canada.

These are not isolated cases. A host of Indian exporters have been forced to make use of innovative measures, including tapping intermediary countries such as the UAE and Bangladesh, which do not face quota shortages due to fewer exporters vying for quota markets like the US, Canada and the EU.

And, all these domestic players are eagerly awaiting the magic date of January 1, 2005, when the quotas imposed on world trade would be dismantled completely and they would be free to export directly and meet the full requirements of their customers in the quota countries.

While it is now well established that Indian exporters would be among the biggest beneficiaries once the quotas are phased out, several analysts as well as a host of industry players contend that India would be in a much better position compared to China. This is because Indian textile players have been extensively focussing on quota countries such as the US and the EU, as opposed to China, which has been tapping non-quota countries such as Japan, South Korea and Taiwan.

"There is immense opportunity for Indian players once the quotas go since buyers in major markets like the US and EU, which will be opened up in a big way post-dismantling of quotas, already have a big supply base in India. Enquiries have already been coming in about how much Indian vendors can scale up production to meet demand post-quota phase-out," a big Delhi-based exporter said.

The Indo Rama Synthetics' Managing Director, Mr O.P. Lohia, agrees. "Indian exporters stand to gain more than their Chinese counterparts by virtue of their presence already in the major quota markets. For the Chinese to tap the post-quota opportunities, it would mean a shift from their traditional non-quota markets of Japan and Korea," Mr Lohia said.

According to KSA Technopak, the biggest advantage that both India and China have is that the two countries have the twin advantages of an integrated production chain as well as low labour costs. It is for this reason that Indian exporters have managed to retain cost competitiveness in the international markets despite having to re-route their consignments through other countries.

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