VZCZCXYZ0007
PP RUEHWEB

DE RUEHDM #1016/01 2841333
ZNR UUUUU ZZH
P 111333Z OCT 07
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC PRIORITY 4263
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS DAMASCUS 001016 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EEB/TPP/ABT GARY A. CLEMENTS; STATE PLEASE PASS 
TO USTR CAROYL MILLER; COMMERCE FOR ITA/OTEXA MARIA D'ANDREA 
 
E.O. 12958: N/A 
TAGS: EIND ETRD KTEX SY
SUBJECT: UPDATE ON SYRIA'S TEXTILE AND APPAREL INDUSTRY 
 
REF: STATE 114799 
 
¶1. (U) Summary.  As Syria's oil exports decline, its 
textile/apparel industry is assuming a larger share of total 
Syrian exports at 17 percent.  Relatively, however, Syria's 
textile/apparel industry remains a small player in the 
international arena.  Combining subsidized raw materials and 
production costs with inexpensive labor, the Syrian 
textile/apparel industry offers acceptable-quality goods at 
relatively low prices to both domestic and regional markets. 
However, insufficient technology and stifling government 
bureaucracy continue to constrain the industry from reaching 
its potential.  This year, Syrian textile exporters have 
benefited from high oil prices and the declining value of the 
US dollar against the Chinese Yuan.  The higher oil prices 
have resulted in a reported threefold increase in the cost of 
shipping a container from China to Europe and the Gulf. 
Additionally, Syria's geographic proximity to Europe and 
membership in GAFTA ensure that Syrian textile/apparel 
exporters will retain a niche in their primary markets.  End 
summary. 
 
¶2. (U) The following statistical data for 2006 was provided 
by the Central Bureau of Statistics. 
 
-- Total Syrian industrial production (excluding petroleum): 
USD 2.6 billion 
-- Total textile/apparel production value: USD 1.84 billion 
-- Textile/apparel share of host country imports and exports: 
4.1 percent of imports, 17 percent of exports (50 percent of 
all non-petroleum exports) 
-- Value of textile/apparel exports to the US: USD 19.1 
million 
-- Total labor force: 5.29 million people 
-- Total manufacturing employment: 740,600 people 
-- Total textile/apparel employment: Officially reported at 
139,000; (Note: unofficial estimates put the number closer to 
500,000 due to large numbers of unregistered workers employed 
at some 25,000 "micro" factories around Syria. End note.) 
 
¶3. (U) The following answers are based on available public 
data and consultations with private sector industry 
representatives.  The answers are in corresponding order to 
the questions as asked in the reftel. 
 
¶4. (U) Syrian apparel/textile producers complain about 
heightened international competition, from both fellow Arab 
textile-producing states, like Egypt, Tunisia and Morocco, as 
well as China, India and Bangladesh.  However, Syrian textile 
producers have traditionally be able to accept relatively 
lower prices due to government subsidization in the supply 
chain and inexpensive labor.  So despite complaints about 
competition, textile/apparel prices today are no lower than 
last year and in some cases are actually higher. 
Manufacturers of apparel, knitwear, blankets and bed linens 
have increased production to meet rising demand from Europe 
and regional neighbors.  Foreign investors in Syria must 
negotiate significant bureaucratic obstacles and strict 
government controls.  Consequently, foreign investment in 
Syrian textiles is extremely small, amounting to no more than 
ten projects.  None of these projects are known to have 
closed over the past year. 
 
¶5. (U) Most Syrian manufacturers believe that a threefold 
increase in shipping costs from China to Dubai, resulting 
from soaring oil prices, is the primary factor in improving 
their competitiveness vis-a-vis China.  Capitalizing on their 
geographic proximity to Europe, Syrian producers also compete 
with the Chinese by offering European importers quicker 
response time in filling short-notice orders. 
 
¶6. (U) In general, Syria has dramatically relaxed its ban on 
most imports over the past two years as part of its shift 
towards a "social market economy."  That said, the SARG 
established a 50 percent customs duty on allowable imports, 
including textiles and apparel, although these tariffs do not 
specifically target Chinese goods. 
 
¶7. (U) The SARG does not, to our knowledge, have programs in 
place to support textile workers dislocated due to 
international competition.  The public sector textile 
manufacturer, the General Organization for Textile Industries 
(GOTI), has operated at a net loss for several years and 
employs roughly 30,000 people.  Wages for these employees are 
set by the SARG, and are at or below subsistence levels for 
Syria.  Syrian unions are organized to serve as instruments 
of the state and do little to affect wage changes.  The 
private textile/apparel sector employs between 110,000 and 
500,000 workers.  Some large private manufacturers have 
recently instituted modern human resource management 
practices to develop employee loyalty in an effort to both 
increase productivity and prevent trained employees from 
seeking work elsewhere. 
 
¶8. (U) For now, the SARG seems willing to accept GOTI's 
financial losses, which it asserts amounted to eight million 
USD in 2006.  In contrast, private sector manufacturers are 
actively seeking ways to improve their competitiveness.  From 
hiring foreign  consultants to installing automated 
production lines and investing in human resources, Syrian 
manufacturers are trying to reduce costs and add value to 
their products.  Private producers believe that, by focusing 
on their comparative advantages of quality raw materials, low 
overhead and central location, they can successfully compete 
in niche markets in Europe, the Persian Gulf and the 
Mediterranean basin. 
 
¶9. (U) Syrian textile exports to Arab states, particularly in 
the Gulf, increased after Syria joined the Greater Arab Free 
Trade Agreement (GAFTA).  However, weak customs regimes in 
GAFTA countries also enabled Chinese and other non-Arab 
textiles to be smuggled into many GAFTA countries under 
forged certificates of origin and fraudulent labeling, such 
as "Made in Lebanon" or "Made in the UAE."  Consequently, the 
SARG Customs Directorate has sent several delegations to the 
Emerati port of Jebel Ali to verify the origin of incoming 
textiles and apparel. 
HOLMSTROM