Executive Summary

The Mauritian economy grew rapidly during the early 1990s as the country embraced trade
liberalisation and became increasingly integrated in the world economy. For most of the 1990s,
annual growth was of the order of 5% to 6%, mainly due to the strong export performance of the
textile and clothing industry aided by preferential access to the European Union. Despite this
remarkable achievement, Mauritius now faces an economic slowdown due to a number of
factors, both internal and external. In early 2000, the country was poised to take advantage of the
Africa Growth and Opportunity Act (AGOA) but up to now Mauritian manufacturers have been
unable to make a significant impact in the huge American market. The textile and apparel quota
system will be eliminated on January 1, 2005 as agreed by the Uruguay Round of trade talks.
Currently, Mauritian manufacturers are witnessing the adverse effects of competition from low
cost producers on the domestic industry with quotas. This paper also outlines the strategies being
implemented to sustain the industrys competitiveness and responsiveness to these factors.

Table of Contents:
1.

Introduction

2.

External Forces impacting the industry

2.1.1

Impact of Political Factors

2.1.1.1 Response to Political Factors

2.1.2

Impact of Economic Factors

2.1.2.1 Response to Economic Factors

2.1.3

Impact of Social Factors

2.1.3.1 Response to Social Factors

2.1.4

Impact of Technological Factors

2.1.4.1 Response to Technological Factors

2.1.5

Impact of Legal Factors

2.1.5.1 Response to Legal Factors

2.1.6

Impact of Environmental Factors

2.1.6.1 Response to
3.

Conclusion

4.

References

Environmental Factors

1.

Introduction:

Over the past three decades, the textile and clothing industry has been an engine of economic
growth, generated thousands of new jobs and propelled this island-nation towards prosperity. The
industry accounts for 12% of gross domestic product (GDP), employs nearly 77,000 people out
of a workforce of 550,000 and generates about 65% of export earnings (USD 1.1 billion).
Employment in this sector increased by about 13% from 1995 to 1999 but it has now stabilised
mainly through gains in productivity [1].
With trade liberalisation, the Mauritian textile and clothing industry is now faced with a number
of short and medium-term challenges, on both the internal and external fronts. These relate
mainly to elimination of trade preferences (political factors), exchange rate fluctuations
(economic factors), relatively slow pace of restructuration and diversification, increased
competition from low-cost manufacturers, rising costs of air and sea freight (international
factors), and low penetration of new markets.
Faced with growing unemployment (about 10%, March 2004), accelerated economic growth to
create jobs and improve standard of living is on top of governments agenda [2]. Textiles and
apparel will remain one of Mauritiuss key manufacturing sectors but a new mindset is critical
for the renewed health of the industry. The sector has no option but to invest in product and
design innovation through research, new technology (technological factors), highly skilled
workers and successful marketing. How we innovate, how we use materials and machines in new
ways and anticipate consumer demands will dictate the future of the Mauritian textile and
clothing industry.
Mauritius, therefore, urgently needs to translate this competitive advantage into substantial
inflow of foreign investment and skilled job creation. In terms of trade, government policy (legal
factors) is to defend acquired markets, as well as to vigorously seek new markets. It seeks to
capitalise on all opportunities opened to it (such as through the Africa Growth and Opportunity
Act), and has been active in pressing for the opening up of regional and sub-regional groups
which it sees as providing opportunities for greater 3 trade and investment. In addition,
government, through appropriate legislation, has improved Mauritiuss reputation for (homeland)
security and institutional fairness among potential investors.
Despite the volatility of textiles and clothing, Mauritius has been quite successful in preserving
market share. Unfortunately, the removal of preferential access to traditional markets threatens to
undermine the industry and thus limit Mauritiuss growth. The restructuring of the industry is
high on government agenda and a number of policies including diversification are being pursued.
The natural disadvantage facing small island developing states (SIDS) is their small size, small
size of their domestic markets, limited natural resources, limited human capital which in turn
negatively impact on foreign direct investment (FDI). FDI, following the trend over the last
decade, has been little interested in the production of low value-added goods. The thrust of FDI,

as in India, China or Mexico, has gone towards the production 4 of high-tech products either for
export or domestic consumption, taking advantage of their huge domestic markets, which SIDS
will never have. The drought of FDI in the textile and clothing sector in Mauritius may be
attributed to two main reasons; small size of the domestic market and low pace of diversification
into higher value-added activities within the sector. Though Mauritius is investor-friendly and
enjoys a number of competitive advantages (social, cultural, political, environmental), the trickle
of FDI has proved difficult to reverse.

2.

External Forces impacting the industry

As mentioned previously, there are many external forces impacting the textile industry
such as competitive, economic, social, technological, legal, international and
environmental factors.

4.1.1

Competitive Factors
What is important here is the number and capacity of your competitors. If you have many
competitors, and they provide products and services equally attractive, then most likely
will have little power in the situation, because the suppliers and the buyers will go
elsewhere 189 if you do not get a good deal from you. On the other hand, if there is no
one else that can do what you do, then you can be a formidable force in often (9). Like the
sugar industry, which was once Mauritius main export, the nations textile industry have
also faced rising threats from international competition. The end of the Multifibre
Arrangement in 2005 compounded this, exposing textile firms to lower cost competition
from Asia. (8)
2.1.1.1 Impact

of competitive Factors
Mauritius has faced tough competition from Asian countries, able to
exploit a huge cheap labour pool to produce very cheap garments. So
it is no surprise the Mauritian textile industry suffered as the retailers
that Mauritius supplies struggled to attract customers. (6)

2.1.1.2 Response to

competitive Factors

It is imperative for textile manufacturers in Mauritius to reign in costs where possible, and pass
on the savings to retailers. First, it helps to compete with lower cost suppliers in Asia so as we
dont risk losing existing contracts with retailers in the future. Secondly, we could become more
versatile, to protect the industry should another global economic recession rear its ugly head.
This would mean being able to supply clothing for the budget retailer market. For example, retail
chains in the UK like Primark and New Look, who have done very well during the economic
downturn. (7)

4.1.2

Economic Factors
This refers to how exchange rate, inflation rates, interest rates and economic growth will impact
on the industry and how it can grow, develop and make various decisions. For example, if the
textile firms export clothing, these operations can be greatly affected by exchange rates and
these factors should be included in the business strategic management plan if they are to
succeed.
2.1.2.1

Impact of Economic Factors

Mauritian exporters are adversely affected in terms of export earnings in case of swings
in real exchange rates as they are unable immune themselves from the adverse
movements in real exchange rates for simple reason that hedging is deemed to be costly.
This has always been the case in Mauritius. The textile sector was surviving thanks only
to the large established players. Small players were having much difficulty to operate
owing to frequent swings in the exchange rate. Moreover, a real depreciation of the
Mauritian rupee makes imports dearer and raises the cost of production of firms in the
manufacturing firms, which rely heavily on imports of their raw materials. As a result of
increased cost of production, competitiveness is eroded on the world markets
characterized by fierce competition from emerging players from China, Pakistan, Sri
Lanka, India, Brazil and other Asian economies. Thus, a real depreciation of the rupee
adversely impact on Mauritian manufacturing exports.
2.1.2.2

Response to Economic Factors

4.1.3

Social Factors
Social factors refer to how a society behaves culturally, how the population rate will
grow, how health conscious people in a country are, how its range is distributed in a
country and the various attitudes people have towards their careers. When social trend
changes, it can greatly affect the need for a business's products or services, for instance
clothing.
4.1.3.1 Impact of Social Factors
In early years, women were traditionally seen as housewives and did not even get access
to formal education. They were dependent on their husbands and were unable to travel
and learn new things. Consequently, men were the sole breadwinners.
In addition, many parents were not able to finance the education of their children.
4.1.3.2 Response to Social Factors
The textile industry has played an important role in the development of the country. With
the introduction of the free zone in 1970, many Mauritians were out of poverty. The pay
was meager but steady. The textile workers, especially women, have progressed. The
textile industry has greatly contributed to the development of women. The textile and
clothing sector has employed and is still employing a majority of women. Women
represent an important pool of labour for industrialists. This has obviously brought a
change in the role of woman: from a docile housewife to an independent income earner.
The textile workers are constantly learning. Discipline and courage are among the
qualities of an employee of textile and this includes the hard work is well rewarded in
the end. The textile industry has allowed Mauritius to grow economically. The zone has
placed Mauritius on the international market, which has forced factories engaged
in export to train their employees to be workers seriously. We can say that the
contribution of the textile industry in the country's social development is simply
immeasurable.[3]

4.1.4

Technological Factors

When we talk of technological factors, we refer to how technology can change and looks at
automation, research and development activities and technological incentives that are
available. Technology can also have a great impact on efficient productivity levels and
influence decisions in the textile industry. In addition to this, there are changes in
technology that can affect the costs that a business needs to meet and can improve the
quality of clothing that the firms offer.(5)
2.1.4.1

Impact of Technological Factors

The investments and participation of the Mauritian government and industry in education
and training are quite low, particularly relative to the important contribution (65%) of
the textile and clothing industry in export earnings. If such a situation continues, the
competitiveness of the Mauritian textile and clothing industry will be significantly
affected by technology. In this global economy, nearly every competitor can potentially
have access to technology, equipment and capital to create products. The determining
factor will be the availability of skilled labour. Over the past two years, the textile and
clothing sector has continuously received a bad press and job seekers are now reluctant
to enter the industry. Many enterprises are currently facing recruitment problems.
2.1.4.2

Response to Technological Factors

The University of Mauritius has thoroughly revised two bachelor degree programmes in
textiles and added a significant component of Information and Communication
Technologies (ICT) to boost student intake. The programmes, however, still emphasise on
latest technologies in design, production and e-business. The government, recognizing the
importance of human capital for wealth creation, has set up the Human Resource
Development Council (HRDC) to promote human resource development in line with
national objectives.

4.1.5

Legal Factors

Factors include discrimination law, consumer law, antitrust law, employment law, and health and
safety law. These factors can affect how a company operates, its costs, and the demand
for its products.

2.1.5.1

Impact of Legal Factors

The Export Processing Zone (EPZ) benefited significantly from the trading arrangements
and the protectionist policies of the EC and the US. However, restrictions mandated by
these trade regimes, reinforced under GATT, may constrain future growth in the export
manufacturing sector. Mauritian investors are acutely conscious of this and have started
diversifying their activities and their markets.
The manufacturing boom over the past fifteen years has nonetheless been remarkable and
has largely been responsible for what is rightly termed an economic miracle. Incentives
in the form of tax holidays, exemptions from import duties and from some aspects of the
regulatory regime, as well as preferential credit were provided to foreign and domestic
investors who would wholly specialise in exporting. The volume of EPZ activity
expanded very fast, benefiting as it did from high profits recycled from the sugar
industry. The success of EPZ industries has been such that they have absorbed the labour
surplus; indeed there is now a labour shortage in the island and several enterprises have
resorted to migrant labour to expand production.
The EPZ is now at a turning point: GATT has eroded its preferential access to EC and
US markets and it has to face rising labour costs which threaten to reduce Mauritius's
international competitiveness.
2.1.5.2

Response to Legal Factors

Investors have started responding to this situation by looking for new markets,
by delocalising production to lower-cost economies, and by recycling profits
in the services and financial sectors. (4)

5.

Conclusion

Mauritian textile and clothing manufacturers will inevitably face difficulties as a result of trade
liberalisation, especially from sourcing giants like China, Vietnam and India. It is indeed more
difficult to quantify the shift so that proactive measures can be taken. Increasing penetration of
global markets will require a lot of effort by individual companies. Each company will have to
study what its competitive advantages are and what improvements and changes it will need to
make to compete in global markets. The role of government as a legislator and facilitator is
crucial to the success of this industry. One option will be that Mauritius will have to carry out the
SWOT analysis to identify the strengths, weaknesses, opportunities and. Also, flexibility and
adaptability in changing economic and political conditions are essential for sustained
competitiveness. Progress in those areas is what will allow Mauritius to thrive in the global
textiles market.

6. References

1. Central Statistical Office, Government of Mauritius, August, 2003.

2. Ministry of Finance, Government of Mauritius, June, 2003.
3. http://business.mega.mu/2013/01/28/42-years-textile-key-pillar/
4. http://www.maurinet.com/business_information/textile_industry
5. http://www.slideshare.net/Gstheproud007/pest-analysis-of-textile-industry
6.http://www.ictsd.org/bridges-news/bridges/news/the-rebound-of-the-mauritiantextiles-industry
7. http://www.w-e-consult.com/news/mauritius15.html
8.http://www.just-style.com/analysis/mauritius-apparel-sector-faces-up-tochallenges_id121724.aspx
9. http://www.gtu.ac.in/ABP/GCSR%20PDF%202013/715%20Mauritius%208-.pdf