The Arcandor era originally began with two equally good and successful ideas: On the one hand there was Rudolph Karstadt, who pursued the plan back in 1881 to open a department store in which all things essential for daily life were located under one roof and constantly available at reasonable prices. On the other hand, a Mr Schickedanz also played a big roll in the subsequent history of Arcandor. He founded the mail-order company Quelle in 1927 and was thus the first retailer in Germany to deliver goods from a catalogue to his customers in their homes.

Both companies enjoyed success in the years that followed their establishment, and both expanded quickly. Following the end of the Second World War and during the economic boom period of the 1950’s in particular, Karstadt and Quelle developed to become synonyms of the prosperous German economy. In 1977 Karstadt expanded to become Germany’s largest retailer, with a turnover of almost eleven billion D-Mark. In 1999 Karstadt and Quelle finally announced that they were to merge to become KarstadtQuelle AG, the largest retail group in the Federal Republic of Germany with 116,000 employees and an annual turnover of 32 billion Euros.

However, the prestigious project was to be anything but a story of success. Shortly after the merger, the companies reported that they intended to economise and make around 7,000 employees redundant, although they were also set to purchase the textile chain SinnLeffers. This marked the onset of delusions of grandeur, which were to cost the group its very existence a decade later.

From 2002, KarstadtQuelle returned harsh losses. Rotations at board level followed market entries into Eastern Europe and other emergent nations, whilst the direction and strategy of the group became increasingly removed from the true demands of the market. A vast, faceless range of average fashions, lifelessly displayed on overfilled clothes rails, characterised the image of Karstadt department stores, whilst shopping centres, individual label and flagship stores for major brands became a long-term threat in town centres. The upshot: Customers turned away from Karstadt. Back in 2004 the company was already experiencing serious financial difficulties, resulting in the closure of 77 deficient stores across the country.

After a brief interim high in 2006, during which KarstadtQuelle suddenly enjoyed profits of almost 350 million Euros again, the company management opted to change the name. KarstadtQuelle became Arcandor. Company boss Thomas Middelhoff concentrated wholly on the shareholder value principle and focussed primarily on the dividend payments to shareholders. The consequences of the terms “reorganisation” and “restructuring” were felt with growing frequency. In 2008, the liabilities of Arcandor AG stood at around 1.5 billion Euros and with them came the threat that a number of expiring credit lines would not be extended. Soon, the talk at the head office in Essen was no longer of restructuring but rather of rescue. As the successor to Middelhoff, the former financial director of the telecoms company Telekom, Karl-Gerhard Eick, was tasked with bringing Arcandor back to profitability at the beginning of this year.

Eick quickly discovered that the group actually had debts of 2.6 billion Euros, of which a considerable portion was repayable in June 2009. Furthermore, Karstadt and Quelle sales rapidly declined even further. Eick desperately attempted to raise fresh funds. However, the major shareholder Sal. Oppenheim did not wish to proceed with recapitalisation and the federal government, when beseeched with requests for aid, refused to ally itself with the company. The upshot: On the 9th June 2009 Arcandor was forced to register its insolvency.

Just three days later the public attorney’s office in Essen initiated embezzlement proceedings against the former manager Thomas Middelhoff.

The insolvency proceedings have since commenced and the one-time largest retail group in Germany is now facing asset stripping. Once this is complete the workforce, which once stood at more than 100,000 employees, will be reduced to around 5,000 members of staff and even this number is highly questionable. A few profitable Karstadt stores will be taken over by the Arcandor competitor Metro, and integrated into its department store chain Galeria Kaufhof. In contrast, it is entirely unclear what will happen to the former mail-order giant Quelle. The company is initially set to be streamlined in order to make it attractive to any potential investors, although it is presently impossible to foresee whether and when there will be any chance for the remaining Arcandor subsidiary in the future. However, one thing is for certain: A great German corporate vision has transcended into one of the most spectacular crashes ever witnessed in the Federal Republic of Germany

The 103-page evaluation report submitted to Sri Lanka by the European Union (EU) on extending the trade concession granted to the country has raised serious concerns over the non-compliance on the part of the government to the EU’s criteria, especially with regard to human rights.

The preliminary report sent by the EU to the Sri Lankan government has raised serious concerns over alleged human rights violations associated with the war against the LTTE.

The government’s efforts to militarily defeat the LTTE soured the country’s relations with the Western world, while earning it new allies in Pakistan, China, Iran and Libya.

However, the EU has now acted on the many concerns raised over alleged human rights violations in the country, and has threatened to withdraw the trade concession Generalized System of Preference Plus (GSP Plus) offered to Sri Lankan exports to the EU market.

One of the key foreign exchange earners for the country, the apparel sector, would be most affected by the withdrawal of the GSP Plus concession. The country earned US $3.47 billion from apparel exports to the EU last year.

The GSP Plus concession is granted to countries based on a list of 27 conventions that need to be ratified by respective countries. Key among them are the conventions on human rights – the International Covenant on Civil and Political Rights (ICCPR), the Covenant Against Torture (CAT) and the Covenant on Children.

Human Rights Ministry Secretary Prof. Rajiva Wijesinha, referring to the concerns raised by the EU over human rights, said that he was yet to see the report.

However, he said the Human Rights Ministry has responded to EU queries through the line ministries that were involved in dealing with the GSP Plus issue.

He said the EU has from time to time raised concerns related to human rights.

Prof. Wijesinha also observed that the government has a couple of areas of concern with regard to human rights violations and that they are currently being addressed.

“There are areas we are trying to work on,” he said. “Some of these issues were used by the LTTE to create an impression that there were blanket human rights violations taking place in dealing with the LTTE. However, Sri Lanka has been far better in dealing with the LTTE than other countries have in dealing with terrorist organisations.”

Prof. Wijesinha further noted that the government is in the process of addressing certain issues related to ICCR and CAT.

“There are certain areas under these covenants that need to be addressed and they are being addressed,” he said.

An expert in the apparel sector told The Sunday Leader that the industry would be dealt a severe blow if the EU withdrew the GSP Plus facility.

He also said that, apart from the apparel sector, several other exports would be affected by such a move. The GSP Plus allows Sri Lanka to export around 7,200 items to the EU without duty.

“The bottom line is that it is a problem, but it is still premature to say anything,” the apparel industry expert said.

The EU will finalise the report after obtaining a response from the Sri Lankan government.

The EU’s final report is scheduled to be released in October, and the official withdrawal of the trade concession would take place after a vote of all EU nations.

Meanwhile, Media Minister Anura Priyadarshana Yapa has said that the government was not worried about losing the GSP Plus facility, as it was a concession that the EU could withdraw when it felt the country’s exports were able to withstand global calamities.

The technique of allowing deferred payments is an age-old commercial strategy more common for sales of washing machines or cars, but the company has embraced the concept to tempt aspirational Indians with restricted budgets.

“This is the first time the world over that apparel like jeans and shirts are being sold on credit that will be deducted by the bank in three monthly installments,” Levi Strauss India managing director Shumone Chatterjee told AFP.

The group, which claims to have created the first blue jeans in 1873, has teamed up with India?s largest private bank, ICICI Bank, to launch the initiative in the IT hotspot of Bangalore.

Buoyed by the response, Levi’s said it was in talks with other private banks such as HDFC to offer credit to a wider range of buyers and in other cities around the country.

Bangalore, with its large young population of IT workers, was an obvious starting point.

“Ever since we introduced the ?buy now, pay later? scheme without interest or hidden charges in June, our sales have surged by 10-15 percent,” Levi?s franchise manager M. Aaron told AFP from his spacious showroom in Bangalore.

The only condition for the credit is that the bill should be for at least 1,500 rupees (30 dollars), which means interest-free repayments of 500 rupees a month.

The lowest price for a pair of jeans in Aaron’s store is 1600 rupees.

Judging by the customers walking out with shopping bags, Levi’s are a hit among Bangalore’s college students, young techies and middle-aged professionals who were busily swiping their credit cards.

The move is an attempt by Levi Strauss to tap into the burgeoning demand for Western-branded clothes among India’s growing middle class.

Changing lifestyles, rising incomes and the influence of Western culture have fuelled demand for designer clothing in India, an obvious symbol of wealth in the status-conscious country.

“With rapidly changing and globally exposed lifestyles, tastes and desires, consumers in India are seeking means to upgrade and update their wardrobes,” Levi?s brand manager Vishal Bhalla said.

Harish Bijoor, a brand specialist who runs an Indian consultancy, told AFP that he expected the installment plan to tempt buyers who might have been put off by the total price tag.

It could also boost sales at a time when consumer spending has weakened because of a broader slowdown in the Indian economy in the wake of the global financial crisis.

“The Levi?s scheme is a trendsetter in the jeanswear or apparel industry, which has been growing in double-digits over a decade,” he said.

“The scheme makes branded products like Levi?s jeans affordable to a critical mass,” he added

The latest hint is due Friday when the government releases data onconsumer spending and income for July.

Personal spending is expected to have posted a modest gain last month, driven higher by the popular Cash for Clunkers program. Economists surveyed by Thomson Reuters expect personal spending rose 0.2 percent in July after a 0.4 percent gain in June.

Economists believe that personal incomes, the fuel for future spending increases, probably rose 0.2 percent as well, following a 1.3 percent decline in June.

On Thursday, a report confirmed that the economy shrank at an annual rate of just 1 percent in the spring.

Many analysts say growth likely returned in the current quarter. Smaller dips in consumer spending and other areas during the April-June period led some economists to raise their forecasts for the July-September quarter.

But with unemployment aid claims stubbornly high, Americans may benefit little from a recovery if jobs remain scarce and spending stays too low to fuel a strong rebound.

The Commerce Department estimated that the U.S. gross domestic product, the broadest gauge of economic health, shrank at an annual rate of 1 percent in the second quarter. The new estimate of the nation’s output of goods and services was the same as an earlier estimate released last month.

The negative figure marks a record fourth consecutive quarterly decline. But it was far smaller than the nosedive the economy had taken during the previous two quarters.

Businesses did slash inventories at an even greater rate than had been expected in the spring. But economists were encouraged by upward revisions to consumer spending, exports and housing construction. Analysts had expected the second-quarter economic figure to show a drop of 1.5 percent.

“The big surprise in this report was that there was enough spending in the consumer sector and elsewhere to offset all the loss from inventory reductions,” said Nigel Gault, chief U.S. economist at IHS Global Insight.

Consumer spending, which accounts for about 70 percent of total economic activity, fell at an annual rate of 1 percent in second quarter. It was a slight improvement from the 1.2 percent decline reported last month.

Gault predicted the economy will gain momentum in the current quarter and final three months of this year as businesses switch from trimming stockpiles to rebuilding inventories. He expects the GDP to jump to above 3 percent in the July-September quarter, boosted by the Cash from Clunkers auto program.

Growth likely will remain around 3 percent in the fourth quarter, Gault said. But then it could slip in the first half of next year as the support from inventory rebuilding begins to fade. Consumers, faced with bleak job prospects, won’t likely be able to take up the slack, he said.

Unemployment is not expected to peak until next spring, probably somewhere above 10 percent. The jobless rate is now 9.4 percent.

White House economic adviser Christina Romer earlier this week said the unemployment rate is likely to hit 10 percent this year. Economists think the unemployment rate will inch back up to 9.5 percent for August, with 220,000 more jobs lost, down a bit from 247,000 in July. That report is scheduled for release next week.

The 1 percent dip in GDP in the April-June quarter followed declines of 6.4 percent in the first quarter and 5.4 percent in the final three months of 2008, the sharpest back-to-back declines in a half-century. The four straight quarterly declines in GDP mark the first time that has occurred on government records dating to 1947.

The recession that began in December 2007 is the deepest as measured by the drop in GDP, which is down 3.9 percent from its previous peak.

Even though economists expect the economy to start growing again in the current quarter, signaling the end of the recession, that won’t mean the end of job losses. Businesses likely will continue to keep tight control over labor costs until they see more evidence that the recovery will not falter.

Some analysts worry the country could face a double-dip recession in which growth returns for a while, only to falter again as beleaguered consumers remain reluctant to increase spending.

First-time unemployment claims fell to a seasonally adjusted 570,000, from an upwardly revised 580,000 the previous week, the Labor Department said Thursday. The number of those continuing to claim benefits dropped to 6.13 million from 6.25 million, the lowest level since early April.

The weekly figures remain far above the roughly 325,000 claims that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007.

Federal Reserve Chairman Ben Bernanke said last week that the economy appeared to be “leveling out” and was likely to begin growing again soon. President Barack Obama appointed Bernanke to another four-year term Tuesday.

NEW YORK (MarketWatch) — Sears Holdings Corp. on Thursday reported a surprise loss for the second quarter, hurt by store-closing and pension costs as well as lower demand for home appliances and apparel. Its shares declined 11%, their biggest drop in seven months.

The Hoffman Estates, Ill.-based retailer (SHLD 64.80, -0.20, -0.31%) swung to a loss of $94 million, or 79 cents a share, compared to a profit of $65 million, or 50 cents a share, a year earlier.

MarketWatch’s Hot Stocks: Retail

Retail stocks were mixed Thursday after Sears posted a surprise second-quarter loss. PetSmart shares also plunged after the pet goods retailer’s profit forecasts fell short of analyst projections. Dick’s Sporting Goods, on the other hand, surged 12%. MarketWatch’s Andria Cheng reports. (August 20)

Revenue in the quarter ended Aug. 1 fell 10% to $10.6 billion. Foreign currency translation impact hurt sales by $126 million alone, Sears said.

Excluding 32 cents per-share costs to cover store closing and severance, 22 cents for domestic pension plan expense and other one-time items, the firm, majority owned by Chairman Edward Lampert’s ESL Investments, said it would have lost 17 cents a share. Analysts, on average, estimated Sears would earn 42 cents a share, according to FactSet.

Sears’ miss dragged down second-quarter industry profit estimate to a decline of 7.7% from a drop of 7.3% Wednesday, according to research firm Retail Metrics.

Sears shares fell 11% to $65.65 in midday trading, marking their biggest decline since January and leading the S&P Retail Index (RLX 358.41, +1.45, +0.41%) lower. The company’s stock had surged 90% this year through Wednesday, outpacing the 28% gain of the S&P Retail Index and performance of rivals such as J.C. Penney Co.(JCP 30.68, -0.01, -0.03%), where shares gained 56% during the same period.

Analysts have faulted Lampert for not making needed capital spending and investments to spruce up stores in the face of increased competition from Home Depot Inc. (HD 26.66, -0.02, -0.08%) to Wal-Mart Stores Inc. (WMT 51.66, -0.05, -0.10%), which have embarked on their own remodeling program.

The recession didn’t help either, as retailers across the board suffered from consumers cutting back on discretionary purchases, especially big-ticket items. Sears also faces the end of its exclusive tie-up with home-furnishings maven Martha Stewart(MSO 4.36, -0.03, -0.75%).

The surprisingly weak result against a very easy comparison “points to the underlying weakness of the franchise,” Credit Suisse analyst Gary Balter wrote in a research note. “We envision continued market share losses. As we look out to the remainder of the year, the comparison continues to get more challenging.”

The operator of about 3,900 Sears and Kmart stores said U.S. comparable-store sales slumped 8.6% overall, — 13% at Sears and 3.9% at Kmart.

The Sears chain was hurt by categories hit by the declining housing market and by lower apparel sales. Kmart also was hurt by lower clothing sales, partly offset by rising home-electronics sales and the company assuming operation of its shoe business from a third party.

Interim Chief Executive and President Bruce Johnson has cut selling and administrative expenses by about $1 billion over the past four quarters as demand faltered.

“The low-hanging fruit has been captured, and (Sears) has limited opportunity to improve the fundamentals of its business,” said Deutsche Bank Securities analyst Bill Dreher, who rates the stock sell.

The company last year reorganized its business into five units including brands and real estate and is exploring ways of selling its portfolio of labels that include Lands’ End apparel and Kenmore appliances. To bolster demand, the company also has started some Christmas sales in a bid to drive traffic to stores.

Gross margin, a measure of profitability, was flat at 26.5%, missing some analysts’ estimates for an increase

Last night I had the kind of nightmare we all dread. There I was, a wizened 85 year old whose pension had run out, madly applying for jobs. Companies I contacted either ignored me or rejected me or, much worse, ridiculed me for trying to get back into the workforce after 20 years of idleness. I woke, not knowing whether any of my job applications had been successful or not, and took stock.

First I reassured myself that I was not 85 but a good couple of decades younger. And as the major shareholder in MBendi and its CEO, I could probably go on working there for as long as I like – unless of course some enterprising investor bought me out, giving me a much-needed nest-egg for my old age. On the negative – or is it positive? – side, both my parents reached 90 and my grandmother died at 96 so my chances of getting to 85 or beyond are pretty good. My big risks are the ongoing viability of the company I work for, the security of my other investments and government plans to change the healthcare system, potentially making it too expensive for me to get quality care. I imagine you could come up with a similar assessment for yourself, no matter where you live in the world?

When I looked around me, I saw that I, like those of you still in employment, was one of the luckier ones. We read of companies, cheered on furiously by the investor community, restructuring to cut costs and so cope with the global downturn. What we don’t read about are the individual stories of workers in their forties and fifties, many with school going kids, who are retrenched in the process, affecting not just the person laid off, but the prospects of all the family members. Some find new jobs despite the stigma of having been retrenched; some set up their own consulting or other businesses, with mixed success; some downscale drastically; and some just disappear from view. The trouble is we never think it could happen to us!

Just this week, the LA Times lamented the rise of people who live in their cars and warned of the prospect of Californian shanty towns those of us in the developing world know only too well. Last month Time magazine ran a series of stories on the young unemployed of Europe; they, more than their elders, seem to be the ones being laid off, raising the already high youth unemployment levels even higher – and they are the lucky unemployed with a safety net of state unemployment benefits that does not exist for most of the world’s population. A couple of months ago, the UK Office for National Statistics reported that 29% of men and 18% of women in the UK aged between 20 and 34 lived with their parents so we probably can’t count on our kids to tide us over in our old-age penury.

We also can’t be too smug about the investment nest eggs that we or our governments have established. In April the OECD reported that the value of assets held by private sector pension schemes around the world fell by an average 20% per cent by the end of 2008 compared with the end of 2007. In Ireland the value of assets backing private pension benefits fell by 35% while in the US the drop was almost 25%. In May trustees of the US Social Security trust fund predicted it will be exhausted by 2037, four years earlier than previously estimated, and the Medicare hospital trust fund will become insolvent by 2017, two years earlier than estimated.

As I mulled on all of this, just the tip of a large and nasty iceberg, I realised there is a chance that my worst nightmare could happen to a lot of us, no matter how cannily we prepare for our old age. I’d better start preparing my CV just in case…

Thanks to my Friend from S Africs..

But with the shifting trade winds of a fluctuating global market, the post-Multi-Fiber Agreement (MFA) era and unfavorable government policies, Indian apparel manufacturers and exporters are dealing with more than their fair share of supply side issues, while keeping pace with traditional rivals such as China and more recent competitors such as Vietnam, Bangladesh and other South East Asian countries.

India’s share of the global apparel trade is around 2.5 percent and it has neither gone up nor down, post-MFA, according to Sudhir Sekhri, an exporter who heads the Export Promotions sub-committee at the Apparel Export Promotion Council (AEPC), the official body of India’s apparel exporters and host of the semi-annual India International Garment Fair, with more than 40 offices and 8,000 members.

Increasing global competition has made Indian manufacturers more attentive to quality requirements, which is giving the country a leg up, says Sekhri. “The effect will be seen in the next few years, when India will be on par with the others. We have better quality than China, but China has a wider range of products,” Sekhri says.

Higher energy, transportation and raw materials costs
One of the advantages China has over India is the ability to transport merchandise from factory to port within 48 hours, whereas for exporters like Sekhri (owner of Trendsetters International) who are located close to dry ports such as the capital city of New Delhi, it takes 8-10 days to reach the nearest port, Mumbai. “This is a huge hidden cost,” Sekhri says, explaining that infrastructure improvements have been slow, because the Indian government has other priorities.

Power supply and transportation issues have been and continue to be huge problems, in addition to ill-advised government policies that make it a far cry from a level playing field for apparel manufacturers competing with rivals such as Bangladesh, which has greater incentives, cheaper energy and very favorable government policies and free trade agreements.

“While roads have been laid from Tirupur to the Tuticorin port, the main problem now is electricity in Tamil Nadu. We get only five to six hours of power, and then we use generators,” says A.Sakthivel, the chairman of Poppys, a $60 million company that employs more than 8,000 people and whose clients include Polo Ralph Lauren and Hanes. Sixty percent of Poppys’ exports head to Europe, 35 percent to the United States and five percent to Canada.

He also heads the Tirupur Exporters’ Association (TEA), an apparel hub in the southern state of Tamil Nadu, where the lack of power and the need to buy diesel fuel for generators has driven up energy costs and limited the number of hours worked by shift workers.

This is just one of many handicaps apparel manufacturers contend with, while striving to become nimble, efficient and competitive in the global market.

Exporters across the country that Apparel spoke with concurred about the very serious drawbacks they face, echoing the same frustration with infrastructure issues and unfriendly government policies that have driven up energy, transportation and raw material costs.

Giving Bangladesh a helping hand
“India has high energy costs and very low transparency regarding excise duty. Another mistake is that India does not allow foreign flag vessels to carry cargo between Indian ports. So the cost of carrying cotton to Dhaka (the capital of Bangladesh) from Gujarat (a Western state in India that produces cotton) is half of what we pay to transport it from Gujarat to South India,” explains Manikam Ramaswami, the chairman and managing director of Loyal Textiles group, a $95 million vertically integrated, public company based in Chennai, Tamil Nadu, specializing in industrial workwear, with joint ventures in Italy, Germany and the U.K.

In addition, Ramaswami highlights the fact that India gives export concessions to its cotton producers, such that Bangladesh buys Indian cotton at prices that are five percent cheaper than what Indian manufacturers pay, in addition to transportation costs that are 10 percent cheaper.

“Export cotton trade in India is in the hands of a few people, so they have convinced our government to do this,” says Ramaswami, who does not mince words and is an outspoken advocate within the textile industry. “So India is helping Bangladesh grow at the cost of its own industry.”

Bangladesh is India’s neighbor and a major competitor whose apparel exports have surpassed India’s levels. It has very low energy costs because 70 percent of its energy is powered by natural gas, primarily derived from agricultural residue, scrub wood and animal waste. Its energy consumption is also much lower than India’s, whose primary source is coal. (Despite being the third largest producer of coal, India faces coal shortages.) This situation will change however, because Bangladesh is now facing an acute gas shortage.

Aside from this and the very obvious advantages that India has inadvertently proffered to its neighbor, thus tipping the scales against Indian manufacturers, there are other lopsided policies that continue to tilt the balance.

The Bangladesh government has given huge subsidies to the Bangladesh apparel industry, because it considers it a priority sector, unlike India, which did so until 10 years ago, before the software services sector overtook apparel exports, according to Sekhri. He explains that the industry is both the second largest source of employment and also the second largest employer of rural women, after the farm sector.  “The government has not given apparel manufacturers the kind of attention we deserve,” he says.

Bangladeshi exporters also have preferential market access to the EU market, which gives them an automatic price advantage, because port duty into the EU ranges from 10 percent to 13 percent, depending on the country.

Lapses in administration and politicians who favor special interest groups have largely contributed to these inequalities for the Indian apparel industry, which is trying to rectify the situation through straightforward appeals rather than underhanded tactics.

The trend towards offshoring hits home
Offshore investments by Chinese and Indian companies have also helped Bangladesh.

“If India seeks a free trade agreement with the EU, the offshore advantage will vanish. Plus, we need to incentivize the industry,” says Ramaswami, who explored options, but decided not to set up operations outside India. “The hope that we will have a receptive government soon keeps me from taking my production outside India,” he says.

Many exporters followed the offshoring trend in order to level the playing field, by establishing offices in Bangladesh and Vietnam and setting up factories there.

Sekhri is one of those who retained merchandising, purchasing and product development in India but relocated most of his production to Bangladesh. With Vietnam and Cambodia becoming expensive, AEPC members are already exploring African countries, he says.

He thinks that this trend will continue. Others, like Ramaswami, think otherwise, preferring to focus on niche markets and spearhead advocacy efforts to change obsolete policies through lobbying.

Leveling the playing field
Given the current scenario, how do Indian exporters survive and overcome the odds? By being creative, by consolidating the back end of the supply chain and by carving out a niche for their products.

Ramaswami’s Loyal Textiles used to make knitted garments, bed linens and industrial workwear. Today, he focuses only on industrial garments with unique value additions.

“We try to make something that is far superior to what is available in the market, with value added treatments like flame resistant, acid resistant, high visibility, anti-static or even a combination of all these. And we differentiate ourselves with the comfort value of our technical garments,” he says.

He cites the example of the Italian Electricity Board, whose workers died in an accident because they did not wear their industrial uniforms, contending that they were too uncomfortable. The organization is now his customer, drawn by the comfort of the safety garments he makes.

Sekhri concurs, emphasizing that value additions and embellishments differentiate Indian exporters from competitors. Given the price advantage that Bangladesh enjoys and the GSP quota that Vietnam leverages for exports to the Unites States, there will be a shift from core products (t-shirts and other lower-end items) to value added, specialized products, such as embroidered apparel and industrial garments.

For apparel firms such as those in Tirupur, which primarily focus on lower-end basic apparel, moving up the value chain is the only way to compete with exporters from Bangladesh.

“Our members are focusing on cutting costs, increasing efficiency, bringing in new technology and people from Hong Kong and Korea for line systems,” says TEA President Sakthivel.

TEA contracted with Lee Muir to build an inland container terminal in Tirupur and then handed it over to private enterprises to run. This enables local exporters to save time and money, by bypassing the middle men and shipping direct and by not having to transport containers to Tuticorin, the nearest port in Tamil Nadu for this apparel hub.

“We have a history of textiles to draw inspiration from, well-developed design capabilities, skilled manpower and an English-speaking executive class,” says Prashant Agarwal, who leads the textile practice as vice president of Technopak Advisors, a consulting firm based in Gurgaon, Haryana, and a strategic affiliate of Kurt Salmon Associates. Technopak offers advice and implementation solutions to domestic and international companies in the areas of apparel, textiles, retail, food and hospitality.

Agarwal points out that the Indian industry has leveraged these advantages in the post-MFA world by being in the right place when buyers were looking for strategic alliances in various countries. “We’ve risen to the opportunity by buying manufacturing units close to markets, specifically in Europe, and we’ve founded a number of joint ventures for a win-win situation with apparel companies overseas.”

Industry insiders also contend that India is the place of choice for buyers in the United States and the EU when it comes to product development or merchandising.

Jockeying for market share with Bangladesh, China and Vietnam
“For fashion, India is the first choice, despite Bangladesh’s price advantage. As for China, buyers don’t want to place all their eggs in one basket so they source from India too,” says Sekhri.

The trade-off between China and India for buyers is about better communication or lower prices. But what about Vietnam? Sekhri dismisses the rise of Vietnam, arguing that he has explored and researched the country thoroughly. “It was competitive last year, but now inflation is around 20 percent and it is not as competitive.”

However, Ramaswami disagrees. “Vietnam has lower prices than India and better communication than Chinese counterparts, so Vietnam is not going to go away.”

To rectify some of the drawbacks facing the Indian industry, the AEPC has transformed its role, from monitoring quotas during the MFA phase to becoming a powerful advocate and facilitator of training and development for its members, sourcing machinery, brokering deals and promoting and showcasing its members’ abilities.

The organization has set up an academy to train and improve the skills of floor-level workers and executives, and partnered with foreign institutions to provide expertise.

It has also recently set up a product development cell to promote 25 apparel categories in which India has not been very active, including swimwear and lingerie – areas where China leads the field. Plans are on to promote these categories to its members, equip them with design capabilities and bring in designers from destination markets.

U.S recession reverberates in India
Those who export a significant portion of their products to Europe have been able to ride out the turbulent waters. Earlier, margins used to vary from 15 percent to 20 percent. Now, it is around five percent to 10 percent, “if you are lucky.”

“Most of my exports were to the U.S. before. Today, the U.S. is only 25 percent of my business, whereas we have had 100 percent growth in Europe,” says Sekhri, whose revenues are down from $30 million to $15 million, after orders from U.S. buyers shrunk.

The bulk of his exports were to Wal-Mart, Sears and Target, but two years ago he shifted his focus to Europe.

“We improved our product development and design, which has really paid off in terms of volume growth, but not in dollar terms, due to the loss of orders from the U.S.,” he explains, adding: “It has been a tough year. I don’t believe anyone exporting to the U.S. has made money in the last year but they hope the tide will turn.”

Hoping for change
After the recession began, with retail clients placing fewer orders, especially those in the United States, some apparel players have been forced to lay off workers and close down factories. This has prompted the government to wake up a little and take note of the plight of the exporters, says Sekhri.

Elections were held nationwide in May; the Congress Party was re-elected to power in a stunning victory, securing more parliamentary seats than before, along with its coalition partners. This has resulted in a political shift, because the coalition government does not need the backing of the communist parties, whose support had led to restraint in economic reform policies.

The textiles portfolio has been allotted to a young, dynamic minister, Dayanidhi Maran, who was highly lauded when he was formerly the union minister of information technology and communications. He spearheaded industry reforms, brought in significant investments and propelled growth in the sector.

The apparel industry in India is tracking the developments and hoping for a change in textile policies, for the better.

Padma Nagappan is based in San Diego and frequently writes about the apparel industry, sustainability, clean technology and CSR.
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With a strong domestic demand and the stimulus provided by the government, Indian textile and apparel industry is confident that it would grow.

With the Central Government recently offering aid under the Technology Upgradation Fund Scheme, the Indian textile and apparel industry is confident that it will be able to handle market competition and grow, especially in the export sector.

The Indian textile companies are now aggressively upgrading their technology to compete in the global market.

India is the second largest textile economy in the world after China. But the slowdown being witnessed in the U.S. and Europe has also caused an impact on its growth.

In the last eight months, India’s five-billion dollar strong textile export sector has witnessed a sharp fall of 33 per cent.

Exporters have been asking for a billion dollar aid for market development and other tax benefits to target newer markets since the U.S. and the European Union countries, which constituted over 60 per cent of the exports, are saturated.

Recently, the government came to their rescue and decided to give 510 million dollars as financial help to domestic textile firms to upgrade their manufacturing units. The aid under the Textile echnology Upgradation Fund Scheme is seen as a stimulus to the sector.

“3,140 crore was allotted to the MoT which was never done earlier. And this was allotted to promote the Textile Upgradation Fund Scheme, which is the most popular scheme in independent India, which has really brought in lot of investment to the tune of 166,000 crores in the textile industry,” said Dayanidhi Maran, Union Minister for Textiles recently.

This is for the first time such a large sum of money has been released at one-go under the scheme. The fund has been transferred electronically through more than 121 financial institutions and banks to the accounts of 12,514 beneficiaries.

The government has already disbursed 1.64 billion dollars under the scheme launched in April 1999.

“If we can increase its capacity as well as quality, definitely the foreign buyers will prefer India instead of China. That means scope for investment in textile industry is still there. So, I would not say that in the spinning only, spinning is already in a sufficient capacity in India, but the value added products in garments and accessories. So there is a big scope of further expansion,” said jit Lakra, Managing Director, Superfine Knitters Ltd., Ludhiana.

Attracting investment would be government’s thrust area to push industry growth rate to 8-10 per cent from the current level of six percent.

To achieve this target the textile ministry plans to attract investments worth over 31 billion dollars over the next five years.

Also, the Indian exporters are looking at newer markets like Latin America, Japan, New Zealand and South Africa. And small-scale apparel and accessories manufacturers and exporters are optimistic about weathering the crisis.

“In the so-called recession period we are doing better than the past years, because we are dealing in fashion accessories. So our items start with 50 cents, 1-2 dollars. So in this recessionary period a woman when she has to change her attire, she would start to change her look with a cheaper item.

She could just change her earrings, she could just change her bangles and she could change her scarf rather than going for a new dress or a new hand bang or new shoes. So, that’s why our sales have increased in these periods,” said K.S.Kohli, proprietor of Kohli Associates Pvt.Ltd.

Textile sector in India accounts for around 8 per cent of GDP, contributes 14 per cent of the value addition in the manufacturing sector and more than 30 per cent of the export earnings of the country.

It is the single largest employer with an estimated workforce of 35 million.

Shrinking global demand has resulted in job losses in the sector, but the government has promised to create 10 million jobs over the next five years.

The government has also announced the constitution of a 41-member working group to form a national fibre policy, aimed at making India self-sufficient in fibre consumption and export requirements. By Karan Kapoor (ANI)