Apparel Online India Magazine December 1st Issue 2018 | Page 18

LEAD STORY
Why Indian Exporters
are Investing Overseas…
Putting up a factory
outside the country is
not a new phenomenon.
Best Corporation, Jay
Jay Mills, TCNS Ltd.,
SCM Garments, Indian
Design, Pearl Global,
Arvind, Raymond,
Modelama Exports
are some of the Indian
garment manufacturers/
exporters which already
have their production
units overseas, some of
them since a very long
time. What is attracting
attention today is the
fact that more companies
are now moving in the
same direction despite
the fact that a number of
Indian states are offering
lucrative subsidies to
fetch investments in
the sector… So what is
the edge that is taking
these companies beyond
borders... Apparel Online
explores the options
available and the factors
that make foreign
investments lucrative
and viable for the
garment export industry.
W
hile initially, most of the
investment was happening in
Bangladesh, mainly due to the cost-
advantage in production because
of cheaper wage rates, the same is
not true today. With wages rising in
Bangladesh and productivity remaining
low, the advantage of cheaper labour
has eroded. Now exporters are looking
at greener pastures and this time,
the focus is not necessarily on cheap
labour and lower manufacturing cost.
One of the countries that is majorly
drawing the attention of these Indian
manufacturers is Ethiopia. Even
mature manufacturing destinations
like Indonesia, Sri Lanka and Jordan
are attracting investment.
Among the latest investments is that
of Matrix Clothing, which has invested
in Jordan. Meanwhile, First Steps
Babywear has announced its intention
of going to Sri Lanka, while KPR Mills
is going to Ethiopia. Encouraged by
the success of its venture in Indonesia,
Modelama is going in for its second
unit in the country. These companies
have very strong reasons for investing
overseas and not all of their reasons
are the same, but primarily they are
governed by their individual focus
area of investment. For some, it is
about manufacturing capabilities in
a particular country which is globally
recognised and for others, it is the
duty-free and FTA advantages that
make the effort worthwhile.
Duty-free access
a major draw…
Though Matrix Clothing, Gurgaon
already has a presence in Bangladesh
and Vietnam for zip and leather
manufacturing respectively, Jordan is
its first overseas venture for garment
manufacturing. It has invested US
$ 6 million in Jordan to take over
the running facilities of IBG (Indo-
British Garments). Gautam Nair,
CEO, Matrix Clothing shared the
reasons for this initiative, “There
are three strategic advantages of
manufacturing garments in Jordan,
but the most important is that it is a
duty-free country for North America
and Canada, which have a very big
competitive edge today. Recently, the
country has also gained some duty-
free concessions for Europe, based on
certain conditions they satisfied.”
Duty advantage is what is compelling
companies to go abroad as the
schemes or subsidies being offered
to Indian exporters by the Centre or
State Governments are mainly related
to infrastructure investment and a
portion of labour cost. The incentives,
as in duty drawback and other
export-related advantages that were
earlier being offered by the Central
Government, have been reduced
substantially, post GST and without
any FTA or duty concession from
trade partners. The Indian export
community is facing huge competitive
disadvantage, even though the
Indian rupee has been weak for
some time now.
Expanding abroad – Lalit Gulati (L) MD, Modelama Exports with
Gautam Nair, CEO, Matrix Clothing
18 Apparel Online India | DECEMBER 1-15, 2018 | www.apparelresources.com
As for the infrastructure support,
as being provided by many State