Gone are the glory days of the local garment industry. From dwindling orders to one manaufacturer having to reduce its work week, it’s been tough going.

Once the darling of the local manufacturing sector, this industry is on its knees. Anthony Rahael, managing director, Regency Manufacturers Limited, says local garment manufacturers need to re-invent themselves and find niche markets both inside and outside TT, if they want to survive. He also believes that the local garment industry is close to extinction, noting that trade liberalisation and the $8 minimum wage may be its death knell. To keep afloat, Rahael now contracts garment manufacturers to produce clothing for his firm. “Eventually when I could not handle the situation and realised that I was not getting enough returns I actually gave the machinery and equipment, some of which I had purchased, to my general manager and said: ‘You produce for me and I will pay you a contract price to manufacture garments for me.”

Regency is the largest manufacturer of casual shirts and school uniform shirts in the country. The company contracts at least three other manufacturers to produce garments. It also exports to other Caricom countries. Rahael recalls that when he first started in 1990 things were running smoothly — until the market was liberalised in 1993 resulting in a never ending stream of cheap clothes, especially from the Far East.   “When imported garments started to flood the country we started to get into some difficulty,” he says. He claims that these imported garments did not meet the required compulsory labelling standards that local manufacturers had to meet. “We are required to produce garments that are properlyb labelled. Sometimes we have to buy and print labels which sell at a minimum of 3,000, when we are only producing 1,000 pieces.” Having to print different labels for different types of materials leads to wastage, he says. He charged that while local manufacturers had to spend money to label their products properly, imported garments were coming into the country improperly labelled, some with no label at all. The compulsory labelling standards set by the Trinidad and Tobago Bureau of Standards (TTBS) state that all garments must have labels which include country of origin, composition of fabric, size, country in which it is made and washing instructions, whether written or in symbols. Rahael admits that the TTBS did try to clamp down on the number of improperly labelled imports, but this he said requires some “real political will” for the TTBS to address the problem.. “What they can do is prevent the goods from entering the country or seize and remove them from shelves, he says, acknowledging that such drastic measures are not going to go down well.

He said the influx of imported garments has continued and the local manufacturers have had to compete with garments that were produced at very low costs in countries like China. Matthew Gonzalves, owner and founder of Elite shirts, says the local garment industry is in big trouble. He said for the last 18 months the industry has been facing tough times especially with the number of imported garments available on the market. “The industry will not survive unless the Government does something to regulate the number of imported garments in the industry,” he warned. The Elite company, which has been manufacturing men’s and boys’ shirts for the past 61 years, has been hit hard. Gonzalves said in addition to sending employees home, he has to reduce the work week. The company once employed 100 people, it now has 75 workers. “The Elite company was definitely affected more than other firms in the industry.” He said while Elite’s export sales to the United States (US) and other Caricom countries have remained steady for the last 18 months, local sales have slumped to 20 percent because of the number of cheap imports that have flooded the market.

He said in addition to having to pay an increased minimum wage, the company is also unionised and he has to pay employees fringe benefits.  “Those garments are coming from countries like China and India which have very low production costs, which makes it impossible for local manufacturers like Elite to compete.”  He added that it is a well known fact that in China the cost of producing garments is quite low and their wages are less than half of what people are paid in TT. “Workers in China and India do not have fringe benefits like maternity leave or holidays and their governments subsidise their exports in order to earn foreign exchange. Obviously a local manufacturer cannot compete with that.”  The introduction of low fares and regular flights to Curacao, which has a free zone, has worsened the situation, Rahael says.  Many people seized this opportunity and went there on a regular basis, purchased their garments at low prices and returned to TT. This put further strain on the manufacturers, he says, noting that the airfare for Curacao is subsidised by that government and its businessmen to encourage more business in that country. “So it is ridiculously easy for someone to go there and shop and come back and compete with local manufacturers.

“While all this is legal and above board, local manufacturers are being hit hard.” When Regency first started business, the company produced a wide range of garments, but since they started contracting manufacturers they have narrowed their range to casual shirts and school uniforms. Everything else is imported. “We have gone from being a major manufacturer to a major importer,” Rahael says, stressing he has not been able to compete with the imported garments. The hike in the minimum wage from $7 to $8 also has brought with it an array of problems. Before the minimum wage, Regency offered employee ‘piece rates’ : employees were paid according to the number of pieces they produced. This, he said, made workers more efficient and productive. “But with the minimum wage, if a worker produced 50 of five pieces they were still going to be paid $7 and that somewhat crippled the industry. Piece rates were more effective because it encouraged employees to work harder.”

He described the implementation of an $8 per hour minimum wage as the “nail in the coffin” for the industry. Many workers had to be sent home when the last minimum wage was implemented and the same is going to happen again, he said.. Even so, Rahael believes that Regency has found its niche market in the manufacturing of school uniforms and casual shirts. “This is our niche market. It is a lot of work but we do it well.” Regency sells its school uniforms through Queensway stores.  So what can be done to revive the industry? Rahael said unfortunately, the government has realised that there are certain industries in TT that are not viable, he says, noting that garment manufacturing is one of them. Government can save this industry only if it reverses the trade liberalisation process, he thinks. But this might not be such a good thing for consumers since the price of garments may go up if this happens.

Gonzalves said while the minimum wage has been a deterrent in the industry, the cheap imports are forcing them out of business. “In my opinion workers deserve a decent salary and I have no objection to that. When workers make decent salaries their buying power is much better.” Like Rahael, Gonsalves also complained about the lack of labels on these imported garments. He explained that while he spends thousands of dollars on a yearly basis to adhere to the requirements of the TTBS to label his garments, garments are entering the country without any labels.  “The TTBS has the responsibility to ensure that all these imported are properly labelled with the required information before they reach stores.” He said he has lodged numerous complaints on this matter at the TTBS. Gonzalves noted that all developed countries around the world require that imports and exports be properly labeled. “Consumers are being robbed and cheated of their money with these imports, because they are not getting quality for their money and the TTBS has to do something about it.”  He said the Government has to take a decision to save the garment industry. “It is the Government’s obligation to the people to ensure that they have jobs. The garment industry in particular is very labour intensive and it has the possibility of employing 20,000 people if it gets the necessary assistance.” He suggested that Government increase tariffs and duties on all products that impact their industries, like the Barbados Government did sometime ago. The Barbados Government increased the duties on imported garments by 60 percent.
“The Government should do something similar here in TT. I am suggesting that there be a flow price (minimum price) of about US $5 on all imported garments and that Customs be given the power to confiscate any goods that arrive in TT under that value.” The Trinidad and Tobago Bureau of Standards (TTBS) believes that it has been successful in preventing non-conforming goods, including garments, from entering the country. The TTBS examines goods at the port of entry and at importers’ premises to prevent goods that do not meet the requirements set in the standards from being put for sale.

However, according to Kenrick Romain, marketing manager, TTBS, because the organisation is no longer in the baggage room of Piarco, small traders who use the port do not have their goods examined. TTBS wants to resume that examination at Piarco. Anthony Hosang, first vice-president, Trinidad and Tobago Manufacturers Association (TTMA), said the local manufacturing sector needs to seek out more niche markets and add more value to their products rather than compete with bulk or large manufacturers in the Far East. He said this may require re-tooling and some research and development into new markets as well as market sectors. Still, the garment sector, he says, may never again employ 16,000 persons as it did in the past.

Local investors are being urged to put their money into small, micro business because not only would this put faith in this fledgling sector, but also lure foreign investors in.

Teresa Barger, director, Private Equity and Investment Funds, International Finance Corporation (IFC) said this sector will only grow  if local investors invest in the market. “I think that the future for SME (small micro entreprises) sectors in countries like TT lies in the hands of local investors. What we have to start seeing is more local investors stepping up to the plate. If they are not willing to take the returns that are being invested why should foreign investors.” Barger was in TT recently attending a Private Equity Seminar which was organised by Development Finance Limited (DFL). The seminar brought together active practitioners in the private equity business in the Caribbean.
The seminar was intended to provide perspective for equity funds in the Caribbean in terms of international experience and trends; the needs of the SME sector and success factors for equity funds. Attendees included representatives from the major funding organisations including the Multilateral Investment Fund (MIF); European Investment Bank (EIB); IFC and the Caribbean Development Bank (CDB).

The seminar provided a forum for these as well as regional fund managers, regulators, and professional advisers to exchange views on private equity investing as it relates to the Caribbean. Key issues discussed included the international industry experience; the organisation of the industry (regulation, accountability, valuation of funds), the Caribbean experience and outlook for the future. In an interview with Business Day, Barger said while the IFC has been  investing in TT for many years, it has not been able to make an impact on the SME sector. “We do not have a fund that is dedicated to TT, but we do have a regional fund — Latin America and the Caribbean which has the capability to invest in countries.” The IFC is an affiliate of the World Bank Group. Headquartered in Washington, this group manages one of the largest portfolios of emerging markets investment funds in the world. The IFC makes both loan and equity investments in all types of companies in developing countries.

Barger said because IFC is not a local institution it is very hard for the institution to make small investments efficiently. She said the IFC usually invests in local banks in various countries, by giving them a line of credit intended for the SME sector. The IFC is working globally to find ways to stimulate the SME sector using the same procedures and systems that banks use for larger companies — but with smaller loans. The organisation has not met with much success, Barger says, noting the IFC is yet to see big banks target the smaller companies.

Barger explained that in TT, instead of just putting equity straight into companies, people are using a variety of financial instruments for investments. She said private equity is an important part of the spectrum of financial instruments and markets because companies will not be able to get bank loans unless there is equity in their capital structures. Barger added that for economies to develop there must be a way to access equity. “The number one way that any company can get equity, especially in the SME sector is through friends and family. There should not exist a private equity or venture capital industry in a market if friends and family are not willing to put their money in first.” She added that the IFC has not set up an individual equity fund for TT because there has to be growth in the economy or a particular sector. “Banks have interest rates, but professional equity managers want high returns as high as 20 or 30 percent when investments are made.”

With this in mind, private equity has to be put into companies that are going to grow and grow fast. She noted that studies around the world indicate that five to ten percent of companies in the SME sector grow to any significant level. Barger added that the IFC is very selective about its investments, because it is the biggest investor in emerging markets.
 “We look at about 200 fund proposals per year and we invest in about eight and we are one of the biggest investors in the world.” Additionally, it is very hard to raise money for private equity because it is a very risky financial instrument. Most institutional investors in the United States  like pension funds or insurance companies will put between two and five percent of their assets in private equity and the rest will be enlisted equities in fixed income and corporate bonds and other instruments.  She explained because private equity is usually invested in growing companies, there are managerial, operational, market and corporate governance risks. That’s because most of these companies are betting on gaining more market share. “That is much more risky than going with an established company that has good systems in place. In small companies you are creating all of that and so you have a risk.”

Barger said the IFC is always open to funding projects in TT, stressing the institution can only invest up to 25 percent at any one time and therefore needs co-investors. “This is the worst fund raising environment that the world has seen since 1994, so we could only invest in a fund if there are about five other investors who are also interested in investing,” she says. Right now, she adds, it is almost impossible to raise money for a single country fund. This is where local investors come in, she says.

Ella Andell, music producer and singer, took the fight against the music pirates to the streets of Port-of-Spain  recently, and came away a disappointed woman.

“I was very disappointed with the physical and visual support from the artistes at the motorcade.  I personally went around to numerous tents to invite people but many of them did not turn up,” she lamented.  Local music artistes are seeing red this Carnival season as they continue to fight a losing battle against music pirates —the cause of millions of dollars of profit losses annually.

According to Copyright Organisation of TT (COTT) CEO, Allison Demas, street piracy is the most visible form of piracy in TT presently, noting too that internet piracy is not a myth. “There is a lot of local music on the net which is not licensed. But by and large, street piracy is the major problem.”  Andell stressed that the solution to the problem of piracy lay in educating the public. Andell, who herself is  an executive music producer and a member of COTT,  was instrumental in hosting an anti-piracy rally through the streets of POS on Friday 14 February in an attempt to educate the public on the illegality of piracy. It is quite obvious, she said in an interview last week, that the artistes and executive producers can’t enjoy the revenues because the public is not educated as to the meaning of intellectual property.

“There is this cheaper market with a cheaper product and people take it not knowing that it won’t last.” “The public loves us, but they don’t understand that by supporting the pirates, the artistes are unable to live from what they produce,” she said. Andell, who recently released her newest album “Spirit Dancer”, is of the view that the present attempts by COTT and local law enforcement to alleviate the problem of piracy were practical.  However, she called on the artistes and executives producers to take a stand against the problem themselves. Demas says, “We not only have to look at it in terms of piracy in TT, but rather in the Caribbean diasporic market, as well as in places like New York, Brooklyn, Miami and Washington DC where the actual volumes far exceed what we are experiencing here on our streets,” she added.

The Annual Report and accounts of COTT for 2001 revealed that the income from Performing Rights amounted to $5,365,927, which was 22 percent less than the $5,488,456 received for Performing Rights in the year 2000. The net surplus from Performing and Recording Rights available for distribution in 2001 amounted to $3,011,525. Jay Berman, Chairman and CEO of the International Federation on Phonographic industry (IFPI), stressed that piracy was the greatest threat facing the music industry today. “The economic losses due to piracy are enormous,” Berman stated in a publication, “and are felt throughout the music value chain.”

Distribution to local right owners stood at $1,011,135 with $1,911,390 going to foreign rights owners.  Simple piracy refers to the unauthorised duplication of an original record for commercial gain without the consent of the rights owner. Counterfeits are copied and packaged to resemble the original as closely as possible, while Bootlegs are unauthorised recordings of live or broadcast performances. “The victims include the artistes whose creativity gets no reward; governments who lose hundreds of millions of tax revenue dollars, economies which are deprived of new investment, consumers who get less diversity and less choice and record producers who are forced to reduce their artistes’ roster because it is impossible to compete against theft,” he stated.

The IFPI characterises piracy as the deliberate infringement of copyright on a commercial scale. In relation to the music industry, it refers to unauthorised copying and in this context falls into three categories: simple piracy, counterfeits and bootlegs. Berman expressed his view that piracy nurtured organised crime since very often the money which is paid for pirated CD’s is channelled into the drug trade, money laundering or other forms of serious organised criminal activity. Piracy, he went on, can also act as a brake on investment growth and jobs. “In today’s global economy, intellectual property is a motor of economic growth,” he maintained, stressing that “governments cannot permit this critical asset to be devalued by piracy.”

In the year 2001, the global pirate music market totaled 1.9 billion units which means that almost 40 percent of all CD’s and cassettes sold worldwide were pirated copies. In TT, the entertainment industry ranks sixth in the economy in terms of foreign exchange earnings, with Carnival raking in the most money, followed closely by overseas live performances by local artistes and merchandise sales. These comprise steelband instruments, records and CD’s among other things. According to Demas, there are a number of factors which contribute to the increase in incidents of music piracy. However, the lack of public awareness of the situation far outweigh the others. Piracy has been described as a “sophisticated industry which defies easy surveillance and detection. One expert went as far as to note that there is an air of romanticism associated with music pirates which prevents some people from realising that they are actually criminals whose actions affect a wide cross-section of people.

“The activities of these organisations include the reporting of sales figures,” Demas revealed. “However, this is not the case in TT, which does not have its own recording industry. So this is a problem.” Additionally, Demas noted, COTT is not an enforcement agency. Therefore, it does not have the power to arrest perpetrators or seize equipment. This, she said, is the role of police and customs. “We really act as a facilitator and because we realise that piracy is an issue, we are certainly willing to assist the police in their enforcement efforts.” The Copyright Act of 1997 states that anyone found guilty of infringement of the law is liable to a maximum sentence of ten years imprisonment and a fine of $100,000. However, there have been complaints that the Act is of little use, since even the police seem unfamiliar with the law. Still, COTT presses on undaunted, dreaming of the day when artistes will receive their just dues. Demas revealed that COTT has started an anti-piracy campaign under the banner: “Buy the music without stealing the music… that means don’t buy from music pirates.”

It has also established an anti-piracy hotline (624-COTT) and is presently running advertisements in the daily newspapers.  They are seeking sponsorship from various funding agencies to have an ongoing campaign throughout the year.