United Arab Emirates : Dubai Textile Trade Expects Strong Growth

Textile trade in Dubai has emerged strongly in the recent times. The boom was inspired by developments such as Dubai Textile City and the scrapping of import quotas by the U.S. in 2005.

Iraq - one word that has Dubai's Dh9 billion a year textile trade in a gush of anticipation. Within weeks of the conflict being resolved, there were initial approaches made by Iraqi traders in Dubai.

While no firm deals have materialised to date, sources here believe it is just a matter of time. "Iraq is one market waiting to explode, and Dubai's textile trade will immediately seize upon the opportunities that will be thrown up there," said Ashok Sawlani, vice-chairman of Texmas, the 300-member industry grouping of textile traders.

"It could be within the space of the next few weeks that a breakthrough will come about. By any measure, there is fairly good cash - in dollars - starting to circulate - in Iraq, and soon this should materialise into actual orders."

Iraq is just one component in the "feel good" factor at work within Dubai's textile market. New markets have already opened up across Africa, including the potentially lucrative South Africa.

"In the last year or two, Dubai is sending out textiles to the entire continent, while in earlier decades, our sphere of coverage was limited to East Africa," said Mahesh Advani, secretary of Texmas. "Cash is paid up front by the buyers, which is another big plus."

According to industry sources, Africa will, in coming years, only increase its offtake of textiles from Dubai.

Meantime, the CIS retains its steady influence on the local market, with the leading Dubai traders having a direct presence there. And some European markets, particularly Spain, have come on board as potential new markets to explore.

This is all build up to what could be in store for 2005 - the opening up of the potentially awesome opportunities in the U.S.

It is expected that the U.S. will be removing all quotas determining shipments of textiles and garments entering that country. "That will be the moment Dubai can gain a permanent place in the global textile trade," added Sawlani.

For the present, the trade has managed to stage a strong recovery from the doldrums of 1998 and the two years thereafter. First came the Russian crisis, followed immediately by the major Asian economies going into a tailspin brought on by currency woes.

To cap the downturn for the local trade, prices of synthetic textiles dropped by as much as 50 per cent at that time, brought on by the crash in oil prices, which were down to as low as $9 a barrel from the $17-18 a barrel range.

"If Dubai's textile trade can weather the impact of three major blows in quick succession, it shows the resilience of the sector," said Jhaman Asnani, chairman of Texmas.

"There were a few traders who had to drop out during the period. However, on the whole, the trade had made a quick recovery. This was clear evidence to the banks and lending partners that they were dealing with a fairly mature trade.

"We have seen them quite willing to take a share of the financing."

Of late, industry margins have been fairly stable at the 5 per cent mark.

Moreover, after the decline of 1998, synthetic fabric prices have been staging a recovery, thus pushing up the realisations of the local trade.

And the kind of pull that China had started to wield in the global textile market, with its shipments at significantly lower rates compared with those from South Korea and other producer nations, has subsided.

Gone, too, are some of the bad practices that had clogged up the local trade.

In particular, there has been a great drop in the heavy dumping that some sections of the trade used to indulge in, often to the detriment of the entire sector.

"In the mid 1990s in particular, there was a situation where there were the main importers on the one side, and on the other, there were the very small operators who used to buy wholesale from the local market and sell here," said Advani.

"The latter category of traders were the ones who went in for heavy discounting to clear their goods whenever a crisis occurred. But now, they have mostly been wiped out of the business, which, in itself, is a positive development."

As of now, retail sales within the UAE represents only about 3 per cent of the total inward shipments of fabrics. Its share has dropped by at least two percentage points over the last couple of years.

"This is a trend that cannot be helped, but is not one that the textile trade is unduly worried about," said Sawlani.

"It goes hand in hand with the growth in ready-made garments. But the wholesale opportunities that have been growing have more than offset any drop in retail sales."