Upon resuming office as Executive Governor Cross River State, it is widely assumed that Ayade’s proposed signature projects would be the Highway and the Seaport, but from a developmental projection, I would rather opine, that the proposed garment factory if properly executed would outshine every other initiative, and would be termed “The real signature”.
This treatise is important at this time to prevent some of our development mistakes in the past were huge amounts have been spent on capital projects like Tinapa without any meaningful returns.
For the past two years, I have written extensively on garment industries and business process offerings (job outsourcing) as the way out of unemployment in Nigeria. I expounded extensively in the Nigerian Guardian Newspaper publication of April 21st, 22nd and 23rd where I argued that as a result of globalization, the internationalization of production and advancements in technology has internationalized labor, hence any country looking inwardly to solve her unemployment crises would never have a headway, only countries or states that decides to key into international markets associated with international labor mobility would succeed.
Ayades decision to key into the international garment industry, is definitely a step in the right direction ONLY if properly executed.
The Big question: How will it succeed?
Our local entrepreneurs expected to champion this cause, do they understand the challenges in this industry? Do we have the logistical requirements to compete favorably with other key actors in this market who approached it as a national cause?
Our current unemployed youths, comprising of young university graduates, do they fit within the spectrum and quality of jobs to be created in this industry? The comparative cost of garment production in competing markets will it be an advantage or disadvantage given our exchange rates?
The citing of our export free processing zone (EPZ) and the factory within the city, is it an advantage or disadvantage when considering the fact that low cost production requires bottom line labor remunerations comparable to profit maximization for the investor?
Some of the major success stories in the garment industries, are countries that produce cotton as a primary export product, and in some cases produce fabrics for secondary and tertiary consumption. Our inability to be a major cotton producer would that affect our competitiveness in the Market?
In attempting to answer these questions, I will explore scenarios and challenges of how the industry operates in other countries, and I will leave the reader to draw their conclusions and opinions.
My analysis will focus primarily on Bangladesh Pakistan and India. These are countries with similar demographics like Nigeria.
Pakistan produces cotton. They attempted entering the garment industry from secondary production but failed. The production logistics and cost of labor coupled with inefficient infrastructure made their products too expensive for the global market where they attempted to compete with India and Bangladesh.
Not considering initial failure as an exit point, they switched into the production of bedsheets, today they are considered one of the world best makers of bedsheets. To be factual, the logistics to produce bedsheets are far less than to produce a shirt that will fit.
Bangladesh on the other hand, unlike Pakistan, imports raw materials for garments like cotton, thread color etc. This dependence on raw materials hampers the development of garments industry and profits. However, the excessive low cost of labor still creates a meaningful profit margin to the investors in Bangladesh.
Calabar factory is expected to import raw materials to run her operations. Would our young white collar unemployed graduates fit into this employment strata given that the wages maybe too low for their consideration?
Remember, the lower the cost of production, the lower the skill sets of those employed. Taking Ethiopia for example, 80% of their tailors are local women who could readily contend with very low wages. The desert nature of their lands encourages them to go into sewing compared to our fertile land were our women may prefer to remain local farmers than to contend with low wages.
At present, the international rate to sew a shirt is between 11 cents and $1.25 cents using US dollar. Considering that one dollar is two hundred naira, eleven cents is about twenty five naira per shirt.
It will take a worker to sew 100 shirts in a day to make an equivalent of twenty five dollars daily which is about three thousand naira for 100 shirts. It is an industry where you are paid based on unit production.
These estimates are the very low end. Because of this low remuneration, most of the illiterate women workers employed in the garment industry are unskilled and so their products are often lower in quality.
In Bangladesh, tasks are allocated largely on the basis of gender. All the workers in the sewing section are women, while almost all those in the cutting, ironing and finishing sections are men.
Women workers are absorbed in a variety of occupations from cutting, sewing, inserting buttons, making button holes, checking, cleaning the threads, ironing, folding, packing and training to supervising.
Don’t forget, each of these sections goes with a cost. If sewing charges eleven cents per shirt, ironing charges 6 cents per shirt, cutting charges 8 cents per shirt, all other sectors estimates a charge, at the end of the day, a simple shirt from cutting to bagging goes out at about 11 dollars per shirt on the high end.
When you apply shipping, marketing and merchandising, you understand why the laborer or tailor is the least paid. Infrastructure availability plays a dominant role in the final production. Electricity cannot afford to go out for 5 minutes else it will create a back log of work.
Uncertainty of electricity, delay in getting materials, lack of communication, are problems that often obstruct the industry. We would recommend Calabar factory to consider solar powered machinery and equipment that will rely less on electricity from the national grid.
Bangladesh has the cheapest unit labor cost in South Asia. It costs only 11 cents to sew a shirt in Bangladesh, whereas it costs 79 cents in Sri Lanka and 26 cents in India. Clearly, Bangladesh’s comparative advantage lies in having the cheapest unit labor cost. It will be interesting to know how Calabar intends to enter the market.
While some of my readers have questioned the rationale for comparing city states engaging in international trade with countries as being a lopsided argument, what they failed to understand is that a city that intends to enter a market dominated by national actors must assume the position of nation states in market relations for it to survive.
With this analysis you can understand why Tinapa failed. Calabar entered into a proposed trade transaction that required the federal government carried along on having to ensure the proper legal and customs frameworks and status was in place for Tinapa Resort.
Upon structural completion of Tinapa, the federal government was not ready, it took almost five years later for the federal government to put the regulatory framework together and by then the structures had decayed and gone bankrupt.
To get the garment industry right from day one, Cross River State government and the developers must carry the federal government along, most especially preparedness of federal agencies including customs.
Bangladesh currently supplies to some of Americas biggest retail stores including Walmart. This explains why clothing’s are cheaper in Walmart compared to other brand stores.
All hope is not lost, Calabar can decide to take orders from high end stores who will pay more for goods. However, the higher brands require higher skill sets, more modern equipment and experience. How then will our garment labor force gain experience if we do not start from cheaper orders with lower pay? The complexity of this industry is as complex as the industry itself.
The interesting part in this industry is that national governments sometimes intervenes and subsidize production and export cost just to gain advantage in the market. Calabar cannot go it alone in this industry, the federal government has to key in.
In a typical example, the Chinese government, in an attempt to monopolize the US garment exports, dropped their export price by as much as 46% just to edge Bangladesh out of the market.
Bangladesh therefore to remain in business had to respond to such price-cutting policies of its rivals in order to remain competitive in the quota-free global market. In Calabar, we may need to own our shipping lines if we must compete favorably in this industry.
One key factor I need to mention here is what we call Lead time. It refers to the time required for supplying the ordered garment products after the export order has been received.
Current international lead time is about 30-40days. In this business, once orders are placed, every day counts. One big problem today in Nigeria is cargo clearing either at seaport or airports.
A successful garment factory cannot afford to have her cargo delayed more than 24 hours by customs either at the airport or at the seaport. Current wait and clearing times for cargo coming into Nigeria is about 7 days or more. Remember the lead time factor?
Once orders are placed by a merchant, everybody must be alert, from the customs officer who clears imported fabrics, to the transport system that brings it to Calabar, to seaports less congested, to tailors on their feet ready to start cutting and design, to availability of electricity to ensure cloths are ironed, parked, inspected to meet compliance and standardization of international exports, to functional banks ready to provide lines of credit within hours, to insurance companies ready to underwrite assumed losses to keep these companies afloat in the event of breach of contracts, to political riots, workers strike for low wages resulting to orders being cancelled, and to small theft of merchandise by employees whose take home pay may not be sufficient to take them home.
Understanding this production process will give you better understanding on why Tinapa failed. Are we really ready to engage international business in this era of internationalization of capital and labor?
You want to know the truth? We have no choice. Labor can never be domesticated again. We either join the band wagon or be relegated to the 4th world. This is why I said Ayade is on the right track, all we need now is getting it right from the start.
Finally, over the years, I have traveled around the world, I understand markets, and I have learnt to think outside the box. My aim is not to discourage government or reduce the moral expectations of the masses on a dream project of this nature, my aim is to alert government and proposed investors to look before they leap, so long as we look, when we eventually leap, we will land on safe waters.
Governments are not good businessmen, but if the government must engage in a business venture, it has to employ the savviness and frugality of a shrewd business man who counts his cost, exploits others to increase his profit line, and by outsmarting others to have a competitive edge.
Ayade has started on a good note! But it is not yet Uhuru, (Celebrations), he must set aside politics and employ the best hands to get it right from the start.
Princewill Odidi is a development Consultant who resides in Atlanta USA. (firstname.lastname@example.org)
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