VZCZCXYZ0000
RR RUEHWEB

DE RUEHYN #1860/01 2741300
ZNY CCCCC ZZH
R 011300Z OCT 07
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC 8144
INFO RHEHNSC/WHITE HOUSE NSC WASHINGTON DC
RUCPDOC/USDOC WASHDC

C O N F I D E N T I A L SANAA 001860 
 
SIPDIS 
 
SIPDIS 
 
STATE/EEB/TPP/ABT FOR GARY A. CLEMENTS, COMMERCE/ITA/OTEXA 
FOR MARIA D'ANDREA, WHITE HOUSE NSC PLEASE PASS TO USTR FOR 
CAROYL MILLER, NEA/ARP FOR NATASHA FRANCESCHI 
 
E.O. 12958: DECL: 10/01/2017 
TAGS: ECON ETRD KTEX YM
SUBJECT: YEMEN'S TEXTILE INDUSTRY IS HANGING BY A THREAD 
 
REF: A. SECSTATE 114799 
 
     ¶B. SANAA 1343 
 
Classified By: DCM Angie Bryan, per reasons 1.4 (b) and (d). 
 
¶1.  (C)  SUMMARY:  Yemen's textile and apparels industry is 
small, comprising 5,000 employees.  Exports are virtually 
non-existent.  Foreign imports account for almost all 
textiles sold inside the country.  No protections exist for 
Yemeni textile manufacturers, the textile industry has 
received only nominal government support, and one of Yemen's 
six textile factories has already stopped production.  Future 
prospects for the Yemeni textile industry seem bleak.  END 
SUMMARY. 
 
------------------------------------ 
TEXTILE PRODUCTION SMALL, BUT STABLE 
------------------------------------ 
 
¶2.  (U)  Yemen possesses a small textile and apparel 
industry.  In a September 17 meeting with Econoff, the 
General Director of the Foreign Trade Office at the ROYG 
Ministry of Industry and Trade, Fadhl Mansour, stated that 
there are only six factories:  three public and three 
private.  Two of the public textile factories are located in 
Sana'a (one of which is operated by the Yemen Economic 
Cooperation (YECO) and one other is in Aden.  The three 
private textile factories are owned by the al-Hotami, 
al-Rajawi and al-Aqil families (all in Sana'a).  Ownership of 
the al-Rajawi company is divided between the ROYG (20%) and 
the private sector (80%).  Yemen's textile industry employs 
at least 4,700 people out of a total population of twenty-two 
million. 
 
¶3.  (C)  National figures on the value of total textiles and 
apparel production in USD value are unavailable, but post was 
able to obtain figures for the private al-Rajawi Yemen 
Textile Industry Company, which sold USD 1.2 million in 
school uniforms, army ware, kitchen fabrics and bedsheets in 
2006 and USD 800,000 during the first nine months of 2007. 
Production of school uniforms and kitchen fabrics has 
increased by 15 percent in 2007 compared to 2006.  Production 
in the al-Hotami factory is very minimal and production in 
one of the public textile factories in Sana'a stopped 
altogether in late 2006.  (NOTE:  The ROYG Ministry of 
Industry and Trade (MOIT) has not been tracking data on total 
industrial production in USD value, the textile/apparel share 
of Yemen's imports and exports and total manufacturing 
employment.  However, the MOIT Foreign Trade Office is in the 
process of being established and will collect these 
statistics in the future.  END NOTE)  According to the World 
Bank, total industrial production in 2005 accounted for USD 
5.13 billion, approximately 35.4 percent of Yemeni GDP.  In 
the industrial production category, manufacturing accounted 
for only USD 667 million in 2005, 4.6 percent of GDP. 
Figures for 2006 and mid-2007 are unavailable. 
 
--------------------------- 
NON-EXISTENT EXPORT MARKETS 
--------------------------- 
 
¶4.  (C) The vast majority of Yemeni textile production is 
earmarked for its domestic market.  Yemen's export of 
textiles and apparels is limited to only one country: 
Ethiopia.  The General Director of the Yemen Textile Industry 
Company, Nabil al-Rajawi, told Econoff on September 10 that 
his company has a branch in Ethiopia which produces bedsheets 
and school uniforms.  His company's exports to Ethiopia have 
been declining.  In 2005, the Yemen Textile Industry Company 
exported only 25,000 school uniforms and 50,000 bedsheets to 
Ethiopia.  In 2006, his company exported only 12,000 school 
uniforms and 18,000 bedsheets.  Yemen currently does not 
export any of its textiles to the United States.  Al-Rajawi 
desires to expand exports of his company's textiles to other 
countries, including the United States, but emphasized that 
Yemen will need to join the World Trade Organization in order 
for this to be possible and that his company will need to 
receive technical assistance and training on international 
standards, best practices and ways to enter and compete in 
the international marketplace. 
 
--------------------------------------- 
CHINA DOMINATES DOMESTIC TEXTILE MARKET 
--------------------------------------- 
 
¶5.  (U)  Yemen continues to face stiff competition from 
textile and apparel imports, especially from China.  Mansour 
noted that Yemen is a member of the Arab Free Trade Area 
(AFTA), but this arrangement has not benefited Yemen since 
this has led to a flood of imports from the region "which has 
left Yemen with a negative trade balance."  According to 
Mansour, ninety percent of textiles in the Yemeni marketplace 
comes from China, Indonesia and Malaysia, while only ten 
percent comes from indigenous Yemeni firms.  Chinese have 
undersold Yemeni products in the market.  Mansour observed 
that "whereas Yemeni-produced traditional mawaz (skirts) cost 
YR 4000, Chinese-produced ones cost only YR 600."  Al-Rajawi 
added that the low price of Chinese imports prevents Yemeni 
companies from raising their own products' prices, which in 
turn prevents them from offering higher salaries to Yemeni 
textile workers.  This problem has become more acute as 
textile workers have demanded higher wages as a result of 
rampant price inflation of basic commodities (reftel B). 
There are currently no protections against the flood of 
Chinese imports.  Protections exist under the new Foreign 
Trade Law which Parliament passed in July 2007, but the ROYG 
has yet to devise by-laws to implement the law. 
 
¶6.  (C)  Yemen's struggles in the textile industry are 
illustrated by one government-owned factory which stopped 
production in late 2006 due to mismanagement.  Mansour said 
that the factory was established in 1962 and that China 
funded both its construction and equipment purchases.  The 
factory used to produce military and school uniforms, but now 
these products are imported from China.  Nevertheless, the 
ROYG continues to pay the factory's 1,200 employees even 
though the factory is no longer producing. (Note:  al-Rajawi 
told Econoff that the Yemen Textile Industry Company has 
partnered with the Yemen Economic Corporation to try to 
rejuvenate the factory.  End note.) 
 
--------------------------------------------- -- 
LIMITED GOVERNMENT SUPPORT FOR TEXTILE INDUSTRY 
--------------------------------------------- -- 
 
¶7.  (C)  Beyond this measure, ROYG support of the textile 
industry in Yemen has been minimal.  Al-Rajawi complained 
that the ROYG still has not built roads or electricity 
infrastructure for his company despite repeated demands.  He 
also argued that the ROYG should subsidize the textile 
industry in order to help it break even in the face of 
Chinese imports. 
 
------- 
COMMENT 
------- 
 
¶8.  (C)  Yemen's textile industry has limited growth 
potential.  Compared to oil and natural gas, agriculture and 
fisheries, the textile and apparels industry accounts for a 
very small percentage of Yemen's GDP.  Most Yemeni textile 
production is geared for domestic consumption and its export 
markets are virtually non-existent.  Post does not expect 
Yemen's textile industry to grow dramatically in the near 
future, or to be competitive in the international 
marketplace.  A significant amount of investment and capacity 
building will need to take place first.  Whether the new 
Foreign Trade Law can protect domestic industries from 
Chinese competition remains to be seen.  END COMMENT. 
 
SECHE