Denim from the Third World now supplies the West

Press, 15 September 1976, Page 16

Denim from the Third World now supplies the West

By

PAUL BETTS

in the

“Financial Times” London The all-time high in the i demand tor blue denim and! the present chronic shortage ( of the cloth has forced many manufacturers of the so-' called “uniform of youth” to| turn to the Third World.

Like Hong Kong, where the manufacturers of Brutus jeans have set up shop, Tunisia is increasingly becoming a buoyant centre for the production of denim. And the Pakistan Export Promotion Office announced recently that it has sent a mission to survey West I European and North Ameri'can markets for denim markets. The survey, it is understood, aims at gleaning Pakistan’s rising denim output more closely to international market trends.

The United Kingdom jeans concern of Lee Cooper, one of the world leaders in this field, said that its Tunisian manufacturing unit at Ras Djebel, half-way between 'Tunis and Bizerte, would be producing between 50,000 and 60,000 garments by t e end of 1977.

The plant, jointly owned by Lee Cooper’s French subsidiary (60 per cent) and the Tunisian Government (40 per cent) started production tn May 1975 and has already attained an annual output of between 20,000 and 25,000. A denim mill set up by the United States concern, Swift, in the outskirts of Tunis, which is already tn production, is expected to reach an annual turnover of 28M metres of denim cloth by about 1978. Other leading

jeans manufacturers, including the American LeviStrauss and the French New Man. are now looking at the opportunities offered by Tunisia for this market. INCENTIVES

i Incentives for foreign companies to establish themselves in Tunisia have largely been responsible for the development of the jeans business there. These incentives were set out under a law that came into force in 1972 which provides a . number of advantages to export-orientated industries. These include exemption from rental value tax levied on business premises, reduced rate of registration of asset transfers, exemption from customs duties on materials imported for production to be exported. Export companies which are non-resident also enjoy relaxed foreign exchange regulations and are not required to bring to Tunisia any profits from operations abroad. The object of the 1972 law is to transform the country into the pivot of a “triangular trade” system in which for eign concerns set up manu facturing plants in Tunisia and then export their products back into the world market. The appeal of the “free trading zones” established in Tunisia can be gauged from the fact that some 160 E.E.C. companies have already set up operations there. Mr Alex Malcolm, of Lee Cooper’s United Kingdom export division, pointed out that the company’s plant at Ras Djebel was not intended to become a “colossal profit centre” but a source of supply of denim products principally for the European market. The company's recent annual report stated that the Tunisian unit sustained a loss in the initial trading period “but is now on a break-even basis.” Dye shortage Mr Malcolm also explained hat the present shortage of ienim was not so much the result of bad cotton harvests

but the result of acute shortages in indigo dye. “There are only four places in the world which produce the blue dye: the United Kingdom, Japan, West Germany and the United States.”

In the United Kingdom, dye is produced by 1.C.1., whose plant at Ellesmere Port, Cheshire, has an annual turnover of 3000 tons of all grades of indigo dye. BASF, Allied and Mitsubishi also produce the dye in West Germany, the United States and Japan respectively. 1.C.1. explained that, in spite of high demand, it was difficult to justify investment in a new dye-producing plant because of the uncertain nature of the fashion business. At the same time, it had been difficult for the United Kingdom textile industry to take advantage of the denim revival because at least 90 per cent of United Kingdom produced dye was exported. Cost disparities

“There has been an enormous disparity in cost between

the dye sold in this country and that sold overseas,” 1.C.1. said. “World prices have in fact been up to 125 per cent higher than United Kingdom prices because of Britain’s price control system. No one therefore was keen to sell dye to the United Kingdom at such depressed prices.” Earlier this year, however, the Price Commission made certain contingency provisions to balance out prices in the United Kingdom with those overseas. As a result about 25 per cent of thf United Kingdom producer dye was now absorbed by the British market. But 1.C.1. added that ir black markets of the Far East retailers were still asking “anything they fancied” fot the dye.

To justify an increase in dye production, according tc 1.C.1. a high level of demand would be needed for at leas’ 10 years. But, according tc Levi Strauss, the present high demand for denim product’ was expected to equate witf supply by 1977-78.