Value Chain Assessment Annex 1. Apparel and Textiles Sector Assessment

Value Chain Assessment Annex 1. Apparel and Textiles Sector Assessment Local Enterprise and Value Chain Enhancement (LEVE) Project APRIL 2014 This publication was produced for review by the United States Agency for International Development. It was prepared by RTI International I C I P r o j e c t G e n d e r S t r a t e g y 1

TABLE OF CONTENTS 1 Introduction Value Chains within the Apparel Sector...1 1.1 Value Chains assessed... 1 1.2 Introduction to this dual industry... 2 1.3 Mass industrial subsector external demand overview... 4 1.4 Mass Industrial Value Chain Map VCs 1, 2 and 3... 9 1.5 The Contract sewers VC1a... 12 1.6 The contract stitchers with multi-product, multi-clients (VC 1b)... 14 1.7 The vendor that buys its own, the offshore vendor and the border model (VC2 a, b and c)... 15 1.8 The smaller scale stitchers and designers Value Chains... 17 1.9 The designers (VC4 a, b and c)... 19 1.10 The accessories makers (VC5 a and b)... 20 1.11 The small stitchers... 21 1.12 The printers (and embroiderers)... 22 1.13 The high-end tailors... 22 1.14 Potential value chains... 23 1.15 The E- Tailors (VC new 1)... 23 1.16 Jeans... 25 1.17 T-shirt printers and polo embroiderers... 26 2 Causal Models...26 3 Market opportunity...36 3.1 New Markets... 37 4 Competitiveness Potential...41 4.1 What are Haiti s competitive and comparative strengths?... 41 4.2 What are Haiti s competitive and comparative weaknesses?... 43 4.3 What is the Quality of the Enabling Environment, and how does the Enabling Environment Impact the Value Chain s Competitiveness?... 46 4.4 Workforce and workforce development... 50 4.5 SWOT Analysis of the Haitian Apparel Industry... 53 4.6 Key success criteria... 55 5 Vision and Upgrading Strategy...57 5.1 Vision of what could be achieved... 57 5.2 Upgrading Strategy: A five-pronged approach (and possibly one more)... 57 5.3 Additional actions towards the Upgrading Strategy... 58 5.4 Exit Strategy for LEVE... 60 5.5 Anticipated impact on women and youth... 61 5.6 Risks and Mitigation... 61 6 Annexes...63 6.1 Annex 1: Summary of Meetings... 63 6.2 Annex 2: Bibliography... 65 A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t i

FIGURES Figure 1: Value Chain summary... 1 Figure 2: How Haiti fits into the picture for the U.S. market (millions USD)... 4 Figure 3: Companies operating in the Mass Industrial value chains... 5 Figure 4: Disappointing figures some growth (millions USD)... 6 Figure 5: Breakdown of Haiti s export by fiber type... 7 Figure 6: Breakdown of Haiti s production by garment type, 2013... 7 Figure 7: Men s and boy s knit tops value against volume category 338... 8 Figure 8: Exports to Canada of textile items (Can $)... 8 Figure 9: The Mass Industry Apparel Value Chain... 9 Figure 10: Processes in the mass industrial value chains... 11 Figure 11: Potential movement along the value chain... 12 Figure 12: Average tee costs... 13 Figure 13: Typical on-water time for fabric and garment (excludes manufacturing time and includes custom clearance and procedures)... 16 Figure 14: What happens when fabric or yarn is stockpiled in the Dominican Republic... 16 Figure 15: The smaller garment industry... 18 Figure 16: What could be Possible new value chains... 23 Figure 17: Who to sell to?... 37 Figure 18: Tee shirt exports to the EU (Euro 000s)... 39 Figure 19: Garment manufacturing labor costs (US$/hour) by Countries... 43 Figure 20: Job functions and related training... 50 Figure 21: Existing training centers... 52 Figure 22: SWOT analysis for the Haitian apparel industry... 53 Figure 23: Assessment of factors used in a typical garment destination SWOT... 54 Figure 24: Key success criteria... 56 A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t ii

ACRONYMS ADIH AGOA APEC ASEAN Bespoke Better Work (Haiti) CARICOM Category CCIH CFI CHAPE Association of Haitian Industry African Growth and Opportunity Act Asia-Pacific Economic Cooperation (organization) Association of South East Asian Nations Completely customized - i.e. for a suit - perfect fit to one person's body Haitian subsidiary of the ILO (International Labor Organization) Free trade area of the (mainly) English speaking Caribbean Garment category used under textile restraint system Haitian Chambers of Commerce - Chambre du Commerce et d'industrie d'haiti Haitian Investment promotion agency Le Centre Haïtien d Appui et de Promotion d Entreprise CHAPE Le Centre Haïtien d Appui et de Promotion d Entreprise Clinton Bush Clinton Bush Haiti Fund CMT (CMP) Cut Make Trim - make up of garment from cutting CNF Cost and Freight (import price of goods at dock of destination) Cumulation Allows regional fabric to count as local fabric for the purposes of garment origin DR Dominican Republic E- Tailor Electronic tailor - processes orders electronically EBA Everything but Arms ECA European Common Area EU European Union Euro-Med Non EU countries bordering or close to the EU Eurostat Statistical office of the European Union FEU (40 ) Haiti Economic Lift Program (HELP) Act of 2010 FOB Free on board (export price of goods at dock of origin) Franchise Customs term allowing goods to be imported duty free as long as they are used within an export orientated factory FTA/ FTZ Full package Ginning Greige GSD GSM GSP GSP+ HAND Free Trade Area/ Free Trade Zone Offer of garment based on supplying all components CMT+ fabric that goes into it (also known as FOB) Cleaning of cotton after picking Grey fabric or yarn that has not been dyed or bleached Garment Sewing Data Grams per square meter for knit fabric - weight General System of Preferences Similar to GSP but gives preference to non-ldc Haitian Network of Designers A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t iii

Haute Couture High fashion especially for ladies HELP Haiti Economic Lift Program (HELP) Act of 2010 HOPE Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 (HOPE I) of 2008 (Hope II) HS Harmonized System IDB Intra American Development Bank INDEPCO Institut National pour la Développement et Promotion de la Couture KWH Kilowatt Hour L/C Letter of Credit LDC Least Developed Country LDP Landed Duty Paid Lint Raw cotton MFA Multi Fiber Agreement MFN Most Favored Nation Mill Factory making fabric ModAyiti Haitian Fashion brand or association MSME Micro Small and Medium sized enterprises NFE No Financial Exchange - fabric supplied without payment for make up OTEXA Office of Textiles and Apparel, US Dept. of Commerce PEPE Second hand clothing market PIC PIRN Different names for the northern Industrial park at Caracol Piece goods Fabric and trims in loose form to make-up the garment PIERS Port Import Export Reporting System Runway Haiti Annual Haitian fashion show Screen printer Prints using a screen Square meter equivalent (unit) a measure of garment volume that SME averages the size of different garments and allows proper comparison by volume Staple Length of fiber in yarn StatCan Statistics Canada Stateside Arrived USA dock Strike off Mockup of print for buyer s approval Sweatshop (pejorative) Garment make up factory often small SWOT Strengths Weaknesses Opportunities Threats TEU (20 ) Twenty foot equivalent (measure of volume for cargo) TPL Tariff Preference Level Transformation Change of HS code number in a product making process e.g. from lint to yarn with spinning Triangular trade Fabric in one country, sewing in another and buyer in a third Trims Garment accessories e.g. thread, button, lining, poly bag VC Value Chain WTO World Trade Organization A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t iv

1 Introduction Value Chains within the Apparel Sector 1.1 Value Chains assessed The Local Enterprise and Value Chain Enhancement (LEVE) team investigated and assessed the value chains described in Figure 1 below. Value chains VC1-8 exist now in Haiti. The team also considered three potential value chains that do not currently exist in the country, labelled VC new 1, 2 and 3. Value Chains 1, 2 and 3 are the large industrial players that employ hundreds or thousands of workers. Value chains 4, 5, 6, 7 and 8 are led by the smaller scale firms, which may employ up to 20 or so employees. The potential new value chains, VC new 1, 2 and 3 are those that the team foresees as having potential, and that may be added to the industry; some elements of these value chains may already be present in Haiti. Figure 1: Value Chain summary Coding Group Type Recommended for LEVE support VC1a Sub contract sewer Contract sewer - without cutting YES VC1b Contract sewer with cutting YES VC2a Vendor - buys own fabric YES VC2b Full CMT vendor Offshore vendor makes own fabric YES VC2c Border model YES VC3 Leather Leather NO VC4a Designer w/o own sewing NO VC4b Designers 1 Designer with own sewing YES VC4c Ethno-centric/ Carnival wear YES VC5a Accessories - fabric based NO Accessories VC5b Accessories - leather and other fibre NO VC6a Small stitcher - (dispersed order) INDEPCO Possibly VC6b Small stitchers Small stitcher (independent) NO VC6c Trainer and stitcher (NOT INDEPCO) Possibly VC7a Printer (artistic/ tourist) artisan NO Printers VC7b Printer - mass/ corporate May overlap with new VC8 High-end tailoring High end tailoring; tailors making suits customized to individuals May overlap with new VC new 1 E tailors E Tailor Recommended 1 Would include accessories A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 1

Coding Group Type Recommended for VC new 2 Jeans Jeans Recommended VC new 3 Corporate printers Printer/ embroiderer for corporate/ event wear Recommended 1.2 Introduction to this dual industry The apparel sector in Haiti has a dual nature: big and small: mass industrial and small scale stitchers and designers. The mass industrial subsector is one of Haiti s largest economic activities and now employs around 30,000+ people and is growing. While the industry is sometimes said to be a shadow of its former self, in terms of apparel, it is actually much larger than ever before by some measures. In 1989 Haiti exported 106 million SMEs of apparel (square meters equivalents of apparel) 2 ; it now exports (in 2013) 309 million SME 3. While it is certainly true that the light assembly industry, e.g. baseballs, has left Haiti (so the total employment in light assembly is much less than before), there is a real feeling of optimism that this could be the moment for the mass industry apparel subsector. On the other side of the sector, there are quite a few small sewers/ designers making goods for the school (and other) uniform markets, upmarket haute couture (for export and local boutiques) and tourist wear/ ethnic-wear (carnival), and at least one or two upmarket tailors. The smaller-scale subsector is often only semi-commercial and sells product by attaching ethical or sympathy (charity labels) to its goods. The mass industrial subsector is at the forefront of a sweatshop industry. A lot of negativity has often been associated with this industry, with pejorative words like sweatshop, and how it treats its workers. However a wind of change is sweeping both ends of the industry: at the micro level designers are coalescing to pool resources and are being recognised outside Haiti perhaps more than ever before. On the macro level, Haiti is becoming well known as offering one of the best investment packages available in this industry to the World s two largest markets the EU and the USA. Indeed, Haiti could be in the unique position of being able to offer duty free merchandise to the EU with just the sewing something nowhere else in The mass industry and small scale stitchers currently have little in common, even in terms of the kinds of trainees that they hire. Indeed there is a huge disconnect, even at training level. The mass industry has tended to train operators inhouse. For more skilled or advanced personnel, the subsector has tended to import many of its requirements from abroad. The small scale stitchers and designers tend to be traied i a alost artisaal or ottage settig, using human powered machines. They graduate trainees who rarely enter the mass industry ad do t have the resources (generally) to buy in expertise from abroad. Latin America can currently offer. While the HOPE/HELP legislation is generous to the point that nowhere else has a better offer except Israel. 2 SME are a measure of apparel origin based on normal fabric consumption per average unit and allow comparison of the total volume moving while looking at units would be distorted if some were very small items like underwear and some jackets. 3 Otexa A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 2

The mass industrial sector has the ability to create a lot of jobs quickly with large investments that can (with available sheds) start, employ and train workers in 6-9 months. Without available sheds (i.e. if they have to build their own) investments would require 9-12 months. Typically each investment of this type would generate at least 1,000+ jobs apiece. Other countries have demonstrated that the textile/apparel sector can be a first stepping stone on the road to more sophisticated industrial development. However it can also be quite a footloose industry (typically following fiscal preference), and can be vulnerable to external shocks. While the second subsector is currently small and dispersed, it has the ability to build longer term depth and (as discussed below in Section 3, on market development) value: to amend/upgrade the image of Haiti. The smaller scale subsector has the potential to present Haiti as a destination, known not only for basic mass commercial stitching making tee-shirts now (or as it was 30 years ago when it mainly made sportswear and sports goods and accessories), but also as a frontrunner in the global garment industry. Much of the smaller scale is foot powered and very slow and the quality variable, while the bigger factories mass produce the same garments to tight quality standards The two subsectors are currently quite distinct and have very limited contact or involvement with each other even in terms of the people they hire. Their employees also tend to come from two distinct training pools. The mass industry typically imports all its skilled elements from overseas, such as pattern making, merchandising or management; and to train lowerskilled operator labor in-house. The smaller-scale subsector industry may have tailors trained at village level centers (e.g. INDEPCO) or with no formalised training at all. Sometimes this difference is also seen as a question of demand local or external. This analysis is slightly skewed by the fact that while Haiti exports upwards of $800 million worth of the garments, much of the apparel worn by Haitians is imported as second hand goods from Western countries: the so-called Pepe market. Indeed much of the current tailoring at village Source: Wikipedia A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 3

level actually relates to alterations of such clothes for the local market. 1.3 Mass industrial subsector external demand overview The mass industrial subsector exists in four hubs: Port-au-Prince (mainly Sonapi and Shodecosa zone), Carrefour, the new park at Caracol and also close to the border at Ouanaminthe. It is generally highly concentrated around ports. It consists of survivors from the time when the stitching industry had a catastrophic collapse in 1994 (and these are generally run by Haitians) and newer arrivals, typically Dominican, Asian and American. The subsector is preference-induced and it is difficult to see how it would still exist (after the end of the Multi-Fiber Agreement in 2006) if it wasn t for the preferential trade packages given by the USA. So not surprisingly the sector is mainly focused on the U.Ss market, with some add-on for global clients who also ship to Canada and Europe. The volumes of non-u.s. cargo remain small. In terms of global trade, Haiti has now overtaken the Dominican Republic in terms of the value of its exports to the USA and has survived the end of the MFA in 2005. Figure 2: How Haiti fits into the picture for the U.S. market (millions USD) Country World 2000 57,232 2005 68,713 2011 77,659 2012 76,811 2013 79,798 Rank Percentage Share of US market China 4,499 15,143 29,392 29,060 29,783 1 37% Vietnam 47 2,725 6,644 7,101 8,126 2 10% Indonesia 2,055 2,875 5,052 4,935 4,975 5 6% Bangladesh 2,116 2,372 4,510 4,470 4,948 7 6% Mexico 8,413 6,078 3,804 3,696 3,682 8 5% India 1,786 2,976 3,316 3,041 3,212 10 4% Cambodia 808 1,713 2,592 2,534 2,555 11 3% Honduras 2,323 2,622 2,615 2,559 2,498 13 3% El Salvador 1,583 1,619 1,738 1,841 1,859 14 2% Sri Lanka 1,472 1,650 1,400 1,477 1,649 17 2% Pakistan 920 1,259 1,655 1,472 1,476 18 2% Nicaragua 336 716 1,357 1,348 1,429 19 2% Guatemala 1,487 1,816 1,321 1,240 1,314 20 2% Italy 1,400 1,354 1,101 1,137 1,225 21 2% Philippines 1,895 1,830 1,180 1,149 1,128 22 1% Thailand 1,820 1,808 1,187 1,073 1,047 23 1% Jordan 43 1,083 896 981 1,043 24 1% Egypt 406 444 903 871 804 25 1% Haiti 251 406 701 730 803 28 1% Dominican Republic 2,425 1,849 654 649 673 29 1% Peru 383 800 714 611 616 30 1% Canada 1,747 1,273 506 515 533 31 1% Malaysia 781 678 505 464 500 32 1% Source: OTEXA A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 4

The mass industry consists currently of 29 distinct operational facilities, plus one for leather 4. Some of these are part of the same commercial groups. They can be listed as follows (Figure 3): Figure 3: Companies operating in the Mass Industrial value chains Coding Type Product Firm Number of firms Nationality VC1a Contract sewer - without cutting Underwear T- Shirt PALM APPAREL, GENESIS, MULTIWEAR, CISSA, PREMIUM, GMC, PACIFIC SPORTS* 7 Haitian,6 Korean,1 VC1b Contract sewer with cutting All types INTERAMERICAN, ONE WORLD, ISLAND APPAREL, LUCOTEX, QUALITY SEWING, HORIZON, MODAS GLORIA, DKDR CONTRACTOR, FAIRWAY APPAREL, PACIFIC SPORTS* (duplicates both) 9 Haitian, 4 Taiwanese 1 USA 1 Korea 3 VC2a Vendor - buys own fabric Sportswear, uniforms, pants, shirts, polo shirts JOHAN, GLADATOR, INDIGO MOUNTAIN, MODAS GLORIA, H&H TEXTLES 5 Korean,2 USA, 2 Haitian,1 VC2b VC2c VC3 Offshore vendor makes own fabric Border model Leather Unsure Sportwear SAE-A (S&H), Willbes 2 Korean Jeans, ladies underwear Gloves and leather Knit gloves Gruppo M (Vanity Fair + LEVIS) 1 DR, ( USA) Hawtan 1 USA FOX RIVER ( not in production for a while) * Pacific Sports does both 1 USA All of the above serve the U.S. market. A few are also doing business with Canada and Europe; these tend to be add-on to orders that are placed together with orders for the U.S. for global shipment, since many brands produce labelling that are multi-market. There doesn t appear to be much or any direct placement of orders, at least for Europe alone. Many of the bigger actors are highly vulnerable to external threats since they are often monoclient, mono-product (tee-shirts or under-shirts) and mono-target market, and often receive their fabric (which generally accounts for 70 % of garment cost on an NFE (no financial exchange) basis from their clients. 4 Better Work Better Work Haiti: Garment Industry 7th Biannual Synthesis Report Under the HOPE II Legislation, produced on 16 October 2013, and other sources A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 5

It should not be presumed that a preference-induced industry, that only uses Haitian labor and practically no other add-ons, can survive or prosper in the context of growing cost pressures on the main Haitian input labor. Haiti must find new ways to develop its apparel sector competitiveness in the medium term, while maximizing the comparative advantage of its low labor costs in the short term. Figure 4: Disappointing figures some growth (millions USD) The big picture - Apparel in Haiti since the end of quota $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 All Tee shirts Underwear Source OTEXA extrapolated While Haiti s apparel and textiles industry is growing, it is growing rather slowly and remains overly concentrated in tee shirts, with direct competition based on preferences with the lowest labor cost in the Caribbean Basin a factor that risks being eroded by proposed changes to the minimum labor law. Some recent proposals to raise the minimum wage and the incentivised level in the industry (what workers should be allowed to earn on a fully productive piece rate) would make the cost of labor (according to some sources) 5 equivalent to what many workers earn in the Dominican Republic. Preferences are also subject to a country cap (or TPL tariff preference level) of 70,000 million SME (square meter equivalents) under HOPE for knits and 12 million dozen SME tee shirts under CBTPA. These were 58.3 % and 57.76 % full at the end of the last preferential treatment period, i.e. September 30, 2013. 6 Of course, Haiti can still ship above the cap but that would be without the duty free saving, So Haiti has to find either new markets or new products that add value and use its TPL effectively. It cannot go on growing in cotton tee shirts, especially as the overall trend of American buyers is to let the garment vendor source its own fabric, which Asian vendors are typically very apt at doing. And once Haiti does reach the cap, preference will cease on the volume over the TPL level. 5 Source withheld since this is a sensitive subject -can be given on request 6 Source Otexa - http://otexa.ita.doc.gov/agoa-cbtpa/agoa-cbtpa_2013.htm A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 6

While there has been some growth in other kinds of garments (figures 5 and 6), this is still very small in absolute terms. Figure 5: Breakdown of Haiti s export by fiber type Earthquake Millions USD HOPE HELP 2006 2010 2012 2013 All $450 $518 $730 $803 Cotton apparel $320 $415 $566 $606 Wool apparel $0 $15 $30 $30 Man-made fiber apparel $129 $87 $134 $166 Silk $0 $1 $1 $2 While most of the growth in the last few years has been in cotton, there is also a strong growth in synthetics that generally incur a higher import duty than cottons. Figure 6: Breakdown of Haiti s production by garment type, 2013 Source: OTEXA A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 7

Figure 7: Men s and boy s knit tops value against volume (category 3387) Value $ million Units Million pieces Rank Country 2013 Country 2013 Averaged Avg. value per piece World $6,206 World 2,273 $2.73 1 China $1,156 Honduras 313 $1.85 2 Honduras $580 China 249 $4.65 3 Vietnam $512 Haiti 244 $1.49 4 India $472 El Salvador 181 $1.89 5 Pakistan $427 Mexico 163 $1.73 6 Indonesia $391 Nicaragua 157 $1.68 7 Haiti $363 Pakistan 147 $2.90 8 El Salvador $342 India 145 $3.25 9 Mexico $282 Vietnam 145 $3.52 10 Bangladesh $275 Bangladesh 117 $2.35 11 Nicaragua $264 Indonesia 107 $3.67 Dominican Peru $251 76 12 Republic $1.38 13 Guatemala $220 Guatemala 73 $3.01 14 Cambodia $128 Cambodia 40 $3.17 Dominican $105 Peru 30 15 Republic $8.46 16 Thailand $59 Thailand 15 $3.95 17 Malaysia $51 Malaysia 13 $3.81 Source: OTEXA extrapolated The above data shows that, while Haiti is number three by volume of knit-shirts shipped, those shipments do not represent significant value-added. In fact they are mainly blanks (no print or other embellishment), and mainly tee shirts whereas other countries are more likely to be shipping predominately printed tee shirts and value added knit tops like polos. Exports to Canada For reference, Haiti s exports of apparel to its next North American biggest market are small, but growing Figure 8: Exports to Canada of textile items (Can $) HS Chapters 2000 2007 2013 61. Knit apparel 4,087,766 15,267,055 19,588,427 62. Woven apparel 296,731 360,721 3,761,090 63. Other textile 2,627,296 17 2,744 Source : StatCan 7 Cat 338 = Men s boys knit tops of cotton A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 8

1.4 Mass Industrial Value Chain Map VCs 1, 2 and 3 A simplified global value chain, from fiber to dispatch, is shown in Figure 9, below. Excluding leather, Haiti is currently only involved at the sewing stage. In the existing preference legislation Origin is conferred with just the sewing; it can also be conferred by some of the other transformations (change of HS code) with spinning and fabric formation. The mass industrial chain typically follows the sequences depicted in the map, with occasional offshoots for special processes and finishes. Figure 9: The Mass Industry Apparel Value Chain The apparel Value Chain - Yarn forward Main route Done in Haiti for Made in Haiti label (simplified) Occasional route Sometimes done in Haiti Could be done in Haiti Fabric Garment Yarn Dyeing Finishing * Finishing * Knitting * Lint Ginning Spinning Dyeing Cutting Sewing Packing (raw cotton) Weaving * Bleaching Mercerising Body sizes * Synthetics - staple Melt Stentorising *Sandblast Crimping (pellet) Spinning Opening * Garment wash Setting *Dye cut Synthetics / silk * no side seam *Other - continuous filament * Sueding *Painting * can also blend *Peaching * Whispering cotton with * All over printing * Embroidery synthetic *Special washes * Printing Excludes blending / doubling Excludes special yarn treatment E.g. whicking / gassing Excludes PFD (Prepared to dye) and bonded fabrics Excludes worsted While Haiti did at one time produce some staple cotton, it is far from recent, and considering the water needs and pesticide implications of cotton production (cotton accounts for 30% of world pesticide use 8 ), it may not be a crop that should be encouraged to be brought back. Another factor is the degree of subsidy given to cotton growing in the USA. With regard to lint (raw cotton), its processing (ginning) is normally based close to the growing area. From lint to yarn the next stage we need spinning. Considering the substantial costs involved with setting up a spinning mill, it is unlikely, at this stage, 8 years after the end of textile restraint to Western Markets (the Multi-Fiber Agreement), that spinning could be restarted. 9 It is simply too late to induce heavy industry with trade preference when there is no longer any quantitative restriction on volume like the MFA quota system. 8 Better Cotton Initiative 9 The MFA began in the 1960s and artificially held back output from most Asian origins to the EU and USA until 2006 when, especially after China s accession to the WTO, it was abolished. Many garment companies were established in places that should never have had a garment industry, like Saipan, Guam and Kuwait, because they were not locations with any of the inputs needed for garment making. With the end of the MFA much of these unnatural origins disappeared. Also, with its end, it is unlikely that more investment will be seen in ginning or spinning except at the closest possible locations to fiber origin/ growing. Currently that doesn t include Haiti. While it is true that the Lomé conventions for the ACP did manage to induce knitting capacity into Sri Lanka, Mauritius and Bangladesh where none existed hitherto, the attempt by AGOA to do the same in Africa (with its constant but only temporary renewals of the third country rule for fabric) have been a failure. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 9

From spinning, there is fabric formation, and the Haitian garment industry does not make any (except leather which is not a staple fabric). So the main operation conferring origin on Haitian garments is the sewing. This alone enables Haiti to obtain duty free preference under the HOPE/HELP legislation, and the sewing along is also adequate to get duty free to Europe with the European Union s Economic Cooperation Agreement with CARICOM. So in terms of the Haitian industry and LEVE s possible interventions, this assessment commences with a fabric forward analysis. At present there are two plans to bring fabric formation to Haiti i.e. SAE-A and Multitex within the Caracol Park (and this has important implications for the pollution that it may generate and water it may use). Garment make-up (from cutting onwards in the above value chain map), often doesn t actually include the cutting of the fabric, nor the finishing and packing (after makeup) which is often done in the Dominican Republic. This, as well as the final dispatch, is allowed under current US preference legislation. However from most garment origins, US Customs would red flag any shipment not proceeding in a sealed container straight from origin to destination because of the risk of fraud or what is known as transhipment i.e. use of one country s origin documents while shipping from another (typically China). That said, there is no evidence of transhipment at present but, if the packing and dispatch is done externally, there is a risk that Haiti s origin rules could be abused with this kind of activity. The existing mass industrial sector in apparel can be divided into three, based on the vendors level of control or not of their own materials (fabric or piece goods), even if that control is frequently not in Haiti. Firstly, there are those who receive the fabric from their buyers, secondly, there are those that buy their own fabric and thirdly, there are those that make their own fabric, but not in Haiti. The last one is generally foreign and often part of large offshore vendors (VC2 and 3 value chains) who make and/or source their own piece goods (fabric and trims). While the Haitian companies generally act as contract sewers or indenters (VC1 value chains), with fabric and trims not owned or sourced by them. As such, while the foreign factories tend to have their own product development and merchandising teams (if not in Haiti) and are relatively well funded, the contract sewers have almost no control of the main cost of the garment, which is the fabric. Typically only having one client, they are almost corporate extensions of the buyer, and have limited involvement with the end buyer. They therefore have limited possibilities of diversification from what is a very vulnerable model. Operations involved in fabric making i.e. knitting or weaving and wet process (dyeing) are not currently not done in Haiti, but for the VC2 value chains take place within the same company group somewhere else, mostly the Dominican Republic or in Asia. In leather (VC3), there is only a single producer. Its end product is mainly industrial work wear, and there is no treatment of effluent. The value chain is not considered further in this assessment. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 10

Figure 10: Processes in the mass industrial value chains Coding Type Fabric making Wet process/ dyeing * Cutting Sewing Finishing / Packing Fabric + trims Design Comment Example of lead firm VC1a Contract sewer - without cutting X X X YES+ NO Buyer Buyer Monoproduct+ client Palm Apparel VC1b Contract sewer with cutting X X Buyer Buyer Multiproduct + client Island apparel VC2a Vendor - buys own fabric X X Vendor Buyer Some control of own piece goods Indigo Mountain VC2b VC2c Offshore vendor makes own fabric Border model Inhouse (not in Haiti) Inhouse (in DR) + bought In- house X X X (Coming) Inhouse or sourced Vendor Buyer/ vendor Buyer Full control of own piece goods Finishing to Haiti by 2014 end Willbes Gruppo M VC3 Leather Local hides Curing Tanning Polishing Coming Coming Own * dyeing- needs water Buyer/ vendor Full control of own piece goods Cuirs Hawtan How can LEVE help these firms to grow, and attract more firms to Haiti? Figure 11 describes several distinct possible movements that LEVE could leverage for each VC. The arrows indicate the possibility for vertical integration along the value chain (left arrow = upstream; right arrow = downstream) or for expanding the number of firms (upwards arrow). For example, contract sewers have potential to add cutting and finishing (if applicable) operations. Companies with cutting operations could graduate to controlling their own piece goods, i.e. buying them or making them. And those who do control their own piece goods (VC2) should seek backward integration to better anchor such investments in Haiti. Haiti should also seek investment by more such firms in the short term. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 11

Figure 11: Potential movement along the value chain VC Type Fab Dye Cut Sew Fin'g / Pack'g Despatch Desirable Need Value chain movement VC1a Contract sewer - without cutting X X X YES+ NO X Add PG/ client / complicated stylings Finance VC1b Contract sewer with cutting X X Add PG Finance VC2a Vendor - buys own fabric X X Add investors More investors like this VC2b VC2c Offshore vendor makes own fabric Border model IH IH Add fabric IH + Bought X X X (Coming) YES+ NO Add finishing + despatch Confidence in Haiti/ treatment facilities + water Treatment plant for washing PG = Piece goods, i.e. fabric and trims Highlighted box = key target 1.5 The Contract sewers VC1a These are of two categories: mono-client/mono-product sewers; and those that take orders from a number of buyers in various stylings i.e. VC1a and VC1b multi-client and multiproduct. VC1b almost exclusively make tee-shirts, which are either outerwear (for possible later printing) or underwear (often a singlet or vest), while VC1b make more varied products sometimes quiet sophisticated like with more embellishment or garment baking. Contract sewers without cutting (VC1a) are only able to compete on what they do, which is just providing the sewing labor. Apart from quality issues, that basically means the cost of labor and how efficiently they use it. This is precarious as there are countries in Asia opening up now with significantly lower labour costs, but without preference, to the USA, which could out-compete Haiti. In fact this kind of competition tends to reduce labor costs to the lowest common denominator; it has been publicised a number of times how the owners of factories have pressured the government not to increase the minimum wage for precisely such a reason. The alternative may be to lose business. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 12

Figure 12: Average tee costs 10 US cents per piece/ (TEU = 20'container FEU= 40') Cost Item Haiti Bangladesh Comment CMP (exclude any trims) 40 25 Cut make and pack Fabric cost at mill based on a 330 gram tee at $5.70 per kg (pastel colors) with 3 pieces per kg consumption 167 167 Freight - fabric to mill 12.5 4 Trims 12 8 Other - + 5% 12 10 E.g. Profit FOB sub-total 244 214 Freight to USA 3 10 CNF Value (USA port) 247 224 Difference to Bangladesh 23 Price quoted based on Dec 2013 - carded 24/single ex Pakistan Freight Intra-Asia is taken at $1000 per TEU and based on a load of 8000 kgs of fabric per TEU/For Haiti take at $6000 for a 40' i.e. 16000 kgs Regional trims are often reported to be double Asian prices Free on Board export price at port from origin Freight ex Orient to EU taken at $3000 -the normal load at 30,000 pieces in 1 TEU/Haiti estimated at $1000 per TEU (guess) Cost and Freight - price w/o duty at destination port Current Duty USA 0% 19.7% Duty is on FOB value Duty value 0 42 LDP USA 247 266 Landed Duty Paid Difference to Bangladesh (19) So the mono-clients should be encouraged to branch out into taking direct orders, since their existing model is vulnerable. The experience of one factory Lucotex is instructive. Lucotex had only one client, and when that client died her children did not continue the business. Lucotex has had no orders for 8 months. Such factories fail to develop or enhance product development skills or merchandising or marketing skills, and become dependent on the feed of fabric from the client. Also, the client can determine exactly what is made in the factory and typically would have calculated the number of garment minutes (known as GSD or General Sewing Data) that would be required to make a particular garment, and then just pay a set price. All of the factories complain that the GSD is often calculated in dedicated units elsewhere for a given styling, and is based on much more competitive factories than those in Haiti that may switch styles frequently. It is also often claimed by factories that the GSD calculations for 10 Fabric prices based on cost exercise in Pakistan in Dec 2013. CMP prices based on authors own research and experience. Some freight values are estimated but unlikely to make a significant impact on the overall cost. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 13

given styles are often wrong but the factory has no choice but to take the orders they are given since they cannot (or do not) pick and choose their clients. As one factory put it 11 before the buyer used to come with samples, and now they come with minutes. By only supplying labor or Garment Sewing Minutes factories are forced to expose their margins, nor can they absorb overhead in the full FOB value of the garment that would be typically be 3-4 times higher than just the CMP value. While this kind of model may be the way to start a new garment factory since typically a new factory may not wish to risk money on buying fabric for new workers to work with (and so it is good to use to someone else s as a factory is started up), it is not a sustainable model for business. It focuses and exposes producers cost structure in a very obvious way, allowing, for example, buyers to directly compare Haitian costs with Asian ones As mentioned, while labor rates have been increasing in Asia recently, new, lower cost Asian markets like Myanmar are entering the fray. LEVE s objective therefore should be encouraging Haitian producers to broaden their customer base. This may not necessarily involve widening their product range, since changing new stylings or fabric may cause output or efficiency to go down or deteriorate. A positive step would be to help producers to start sourcing their own fabric, and therefore be able to offer to a wider range of clients than those who give them their piece goods. It may be that the commercial risk of doing that in the same location is quite high, if the client realises that the factories are no longer dependent on them for their whole existence. It might be wise, then, to diversify at new locations. It is encouraging, for example, to find that Multitex 12, a mono factory, is planning to expand from Port-au-Prince and into Caracol, presumably with a different client base. 1.6 The contract stitchers with multi-product, multi-clients (VC 1b) This value chain includes those manufacturers that wait for known clients to place orders and those that take local subcontracts (sometime known as indentors) from the one or two fabric feeders in the Dominican Republic that send piece goods to Haiti for make-up at more than How garment orders can be financed: example of Bangladesh In Bangladesh, the law requires the customer to pay before shipment or open a letter of credit (L/C). A letter of credit is a promise to pay in return for certain documents at a future date typically against a bill of lading showing goods have been shipped. This L/C can then be backed locally (transferred) to a mill or vendor (who supplies the fabric) in order to purchase the fabric with. The factory can then use the collateral of a future order to obtain their raw materials without significant additional pledges of assets as collateral on its part. This backed L/C ko as a ak to ak L/C has been a major factor in encouraging offshore garment vendors to place in Bangladesh since it reduces risk: neither the stitcher or the mill or the offshore vendor gets paid unless goods are shipped. one factory. While these generally only feed their own dedicated units in Haiti, there is one, Fishman Tobin (Horizon in Haiti), that feeds multiple factories as well as their own unit. The dedicated mills and cutting units in the Dominican Republic of Gildan supply Palm and Apaid and those of Hanes supply the Apaid and Coles Group. 11 Magic Sewing in conversation 12 Based on conversations without independent corroboration with the owner of Multitex Richard Coles A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 14

It would be an advantage in the future, though, to have a pool of available willing factories able to take new orders without being dedicated just to one external client. The main advantage of a buyer supplying the fabric is that it can control its (sometimes) proprietary fabric constructions more closely - since the goods belong to the buyer, and the buyer can prevent sales of its (frequently) branded goods through parallel channels. It also gives the buyer control of its own main cost, which is the fabric (generally accounting for 70 % of garment cost), and its quality. This is however also a vulnerable model since it presumes that the buyer is willing to take the risk of supplying the factory fabric without any guarantees. There is also the extra effort and merchandising skills needed at the buyer s home office to buy, inspect and ship the fabric. While in North America, there is still a residue of garment buyers and firms with these kinds of skills and some brands, like Bestform, Russell and Vanity Fair, still do some part of their own manufacturing in their own plants, this is increasingly being phased out. Also the skill and knowledge base of buyers in North America is becoming more retail-focused with less direct expertise in fabric merchandising. However the main factor is that with the increasingly direct business (from apparel origin rather than offshore hubs like Hong Kong or Singapore) being done by well-financed Asian vendors who can offer a full package service, the buyer is not obligated to assume this risk or effort So the number of firms willing to use this approach is unlikely to grow. It is interesting to note that having been faced with the prospect of no orders the Lucotex factory is now planning to buy its own fabric by backing the buyer s letter of credit to purchase the fabric. So there are alternatives to the NFE model. Also, since the factories do not have to buy their own fabrics and trims, they also don t learn about the business beyond Haiti. So they do not develop product design, nor do marketing or become adept at nimbly responding to changing trends. 1.7 The vendor that buys its own, the offshore vendor and the border model (VC2 a, b and c) Unlike the contract stitchers, there are a number of Haitian-owned factories that do buy their own fabric; and this seems to be increasing. This should be encouraged. The main problem with buying one s own fabric, however, is the distance to its origin generally in Asia. Unlike garment origins where the fabric/fibre is local to a large sewing industry e.g. India, Pakistan or China, Haitian companies bear the added risk of having to pay for the fabric upon shipment, since credit is problematic when goods pass through a frontier with a different legal system and especially one so far away. So a company that pays for the fabric upfront could have to wait 3 4 months before getting paid for the final garment, since fabric has to be ordered further in advance when it is further away. Also, Haitian companies cannot send the fabric back or replace it if defective or of an incorrect specification and still meet their garment delivery. Garment buyers like to place orders for fashion goods as close as possible to their selling window i.e. when placed on the shelves in a shop. The closer they are to the selling window, the more accurately they will forecast the coming trends that will sell at the full retail value. If garments arrive late or they mis-forecast fashion trends or seasonal demand, then goods may be cancelled or remaindered faster at a discount. Since the mark-up from A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 15

FOB to retail is generally 300% (or higher for high fashion goods), the proportion of their range that can be sold in the designated selling window assumes critical importance. While many other garment origins also have to import their fabric e.g. Philippines, their proximity to the big fiber and fabric producers often China, India or Pakistan - give them a certain advantage. It can take up to 6 weeks for a Haitian company to receive merchandise from Asia. This is a major issue for firms in this value chain. Figure 13: Typical on-water time for fabric and garment (excludes manufacturing time and includes custom clearance and procedures) Country Weeks for fabric to reach Weeks for garment to Total on water sewing factory reach market Mexico 0 or imported 4 0 0-4 China 0 3 3 Vietnam 0 or imported 2 3-4 3-6 Lesotho 5 5 10 Bangladesh 0*-2 4 4-6 Turkey 0 4 4 Morocco 3 2 5 Haiti 5 1 6 Jordan 4 2-4 6-8 Philippines 1 3-4 4-5 Source: Various; * if knitted locally- Bangladesh has a large knitting industry based on imported yarn. It has to do that when supplying the EU (under the old rules) since otherwise it would get duty free to the EU. For the U.S. market, it doesn t make any fiscal difference whether the fabric is made locally or not, but it does help in terms of lead time and control for the fabric to be local. The typical garment order from placement to shipment is often only 3-4 months from Asia with a shipment time (Asia-USA) of 3 weeks and the time needed to distribute it to the retail store after arrival of 2 weeks, the fastest delivery would be about 18 weeks from placement to arrival in-store - and the trend is to shorten the time. If a third of that is used up by fabric being on-water, it makes a big difference to the willingness of a buyer to place. Figure 14: Country What happens when fabric or yarn is stockpiled in the Dominican Republic Weeks for fabric to reach sewing factory DR/Haiti Weeks for garment to reach market Haiti- Miami Total on water Haiti 1 1 2 Many of the producers in this value chain are therefore producing in the Dominican Republic. They are able to reduce the longish lead times for piece goods to arrive from Asia by stockpiling yarns and greige fabric locally/regionally, and only completing the knitting and/or dyeing locally. This gives them a quick turnaround that would not be possible if they had to wait for the finished fabric to arrive from Asia. Globally the most common kind of vendor in this category is the one that has its own sewing capacity in offshore locations, but that buys its piece goods from other countries as and when the price and delivery is attractive. Typically these kinds of vendors are very flexible: placing different parts of the value chain all over the world and engaging in triangular trade i.e. buyer in one country, vendor in a second and sewing and/or fabric in a third or fourth country. They are quite flexible in placing the sewing both in their own factories and that of others. However, since much of the production in Haiti is dedicated to specific buyers, they must come to Haiti, set-up factories and sew if they wish to manufacture in Haiti. Of course A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 16

the sewing is also the critical transformation that confers Haitian origin and therefore duty free. An objective for the growth of this kind of value chain would be to see knitting being done locally or regionally; and indeed SAE-A has indicated that it will start knitting from 2017 onwards. It foresees focus on two distinct market opportunities: a. Fabric that can easily be stockpiled and doesn t change much within the season or from season to season. This could include uniforms, workwear and some kinds of men s pants, typically in poly-cottons, TC fabric, or denim for jeans. However, since the risk of an order missing its delivery for a repeating style/shade (and possibly being cancelled) is also reduced since it can be sold in the following season with a reduced loss (compared to a complete write off for a style that is out of fashion by next season), the margins for standard items tend to be lower. b. If dyeing can be added, then yarn that is fairly standard could also be stockpiled and then dyed locally or regionally, which makes it unique. For a 24 single yarn at 180 GSM (grams per square meter), i.e. the standard tee-shirt fabric, the number of possible variants is around the follows: Greige yarn Greige fabrics Dyed shades 5-10 10-20 6 million + So if dyeing can be added for these kinds of vendors, the length of the fabric lead time is mitigated. Another factor affecting the industry here is the need to anchor investments in Haiti. Stitching alone doesn t service as an anchor it can be extremely fickle when only preference-induced and when better or the same preferences are offered elsewhere. A main sunk cost that would serve as an anchor investment would be dyeing, with all the ancillary need for water treatment, whose plant can t be easily moved from place to place. 1.8 The smaller scale stitchers and designers Value Chains While the mass market serves export demand, the smaller tailors serves both export and domestic markets. At the very basic level there are tailoring shops of one or two machines that make some traditional fashion alter existing garments and sometimes make large orders, typically school uniforms, placed centrally by INDEPCO, the main Haitian institution in tailoring training. At another level, there is a generally female tailoring in better goods that cater for the well-off, almost exclusively in Port-au-Prince, for ball gowns, other formal wear, carnival wear and some beach wear. Many of these tailors also have shops that sell both imported and local designs, and some do a little export, often in beachwear. Frequently these shops mix in accessories and other artefacts and are generally own label. Where they are design focused, better goods are frequently imported and where not their range is limited by available materials. Recently 30 of the better end designers have merged together to form an association called ModAyiti and have begun to develop a centralized manufacturing center while holding semiannual fashion shows of their designs. As such they constitute what could be called Haiti s fashion avant garde. Figure 15 describes the rest of the Haitian apparel industry: A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 17

Figure 15: The smaller garment industry VC Type Market Sewing Product Ethical / Own sympathy design label VC4a Designer 1 High X Haute Couture ladies X Stock and sell Shop YES + NO Wholesale X Internet Sales X VC4b Designer 2 High Haute Couture ladies Often YES + NO X Small VC4c VC5a VC5b VC6a VC6b VC6c Ethno-centric / Carnival wear Accessories - fabric based Accessories - leather and other fibre Small stitcher - (dispersed order) INDEPCO Small stitcher (independent) Trainer and stitcher (NOT INDEPCO) Low YES + NO Fad/ seasonal X X X X Low Low n/a Some Hand bags / purses / hair ties Wallets / sandals / hangers X X YES YES + NO X X X Mid Uniforms X X X X Varies Low Alterations / traditional wear /homewear Mostly touristic wear uisng trainees to make commercial goods in return for training Varies X X X YES X X X X VC7a Priter (artisti / tourist) artisan Low YES + NO Tees with print / other Often YES +NO X VC7b Printer - mass / corporate Mid Tees with better print X X Blanks X YES +NO VC8 High end tailoring High Bespoke men's suiting * bespoke = completely customized to 1 person's body size X X X n/a While there are many types and some do overlap the critical element is to combine an existing stitching component with own design, like VC4 b and c. Many of these local producers also use some sort of sympathy label in order to attract buyers always foreign through sales at the only large scale tourist location, Labadee, or through the internet and to the occasional other tourist. There is also a common mixing of donor finance with commercial gain - for example, when a donor has financed a center that is also using trainees to make goods that are sold to help finance the center. The effectiveness of using an origin label to encourage sales is debateable. While some customers may be concerned as to where goods come from, generally what gets them buying (and coming back for more) is the availability of right style/fashion at the right time at the right price. Also the use of sympathy labels on a garment can be controversial if it is not backed up by a clear auditing process that guarantees that benefits flowing to some third party are actually flowing. It would be best to focus on garments that sell on their own merits rather than on some other intangible benefit. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 18

1.9 The designers (VC4 a, b and c) Despite the almost complete lack of formal design training, there are a number of designers, mostly women, producing such goods. Several have combined together in an association called ModAyti, which enables designers to share production facilities to make up their goods. At present this center consists only of a shed built with the support of a grant from the Clinton Bush Haiti Fund. It has yet to start operating and doesn t have any machines installed. Maguy Durce: One of the leading lights in ModAyiti, has stated that some of her dresses sell for upwards of $2000 each like this one with special all-over hand beading A number of designers sell through various means from Haiti, often capitalizing on its unique culture, especially the Caribbean beach culture, its revolutionary history, or simply being the inspired collection of talented individuals. Underfunded and without pooled resources, the capacity and range of these companies is often limited by simple things like available fabric or even a mechanic to fix machines. ModAyiti, with help from CHAPE (Le Centre Haïtien d Appui et de Promotion d Entreprise) and HAND (Haitian Network of Designers), two other organisations that link and help designers to pool resources, would like to address that in their new center by providing a place that would stockpile available fabric and provide skilled seamstresses to make up garment orders effectively and quickly for most kinds of order. Haiti designers could be then well-placed to capitalise on the global Haute Couture market with their own designs. They could also serve as a type of sampling room for others designs - able to make up just a couple of pieces or several hundred, allowing more Example of Trinidad: Anya Ayoung- Chee, winner of Project Runway 2011 experimentation and flexibility and also reducing design risk since the work would be made for others. This could be especially for the rest of the Caribbean, in producing creations with often a very high hand-sewing element like beading work. This would complement the strategies of some other Caribbean Islands that are trying to become a desirable staging place for fashion shows. While few of Haiti s designers are well known internationally, some others in the Caribbean have been able to do very well. The goal would be to make such goods for wealthier Caribbean Islands like the Bahamas or Barbados? While some designers also have their own shops typically in Petionville, catering to a relatively small, local, up-market clientele, others have also sold through the internet and through various regional or local fashion events such as Runway Haiti. A number have also been sponsored to visit trade fairs to showcase their work. One or two may have stores overseas. ModAyiti would like to improve the visibility of a label highlighting Haitian design and has stated the following plans: 13 13 Maguy Durce states (in an email) : je vous envoie comme promis les domaines d'interventions sur lesquels MODAYITI souhaiterait un appui technique ou financier du projet LEVE. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 19

Increase visibility e.g. Runway Haiti Pooled Workshop Open a boutiques in Paris and New York for all designers Start a materials warehouse Franchise and sell the ModAyiti label in Haiti and elsewhere The designers earnestly desire to scale up, with access to a wider range of fabrics to work with, more skilled production facilities and new markets. Part of this value chain includes carnival-wear, which is often fairly crude in its makeup, typically using draping garments that require less sewing. Considering that the various islands of the Caribbean now have carnivals at different times of the year, the possibilities could be immense in serving a region that, with the exception of the Dominican Republic, doesn t really have a stitching industry. 14 Carnival-wear is slightly different since it is often made only for local clients against order and sold wholesale. 1.10 The accessories makers (VC5 a and b) This value chain includes distinct areas, depending on their material: a. Offshoots from designers A number of designers are also doing work with other materials. Simbi, for example, has been making quality goods for ladies, often only on one color, and has used hangers covered in sisal (a local fibre). Paula Coles uses fabric off-cuts from some of the mass industrial factories to create hand-bags. These initiatives almost exclusively come with some form of sympathy label - e.g. Simbi is involved in the provision of clean water to villages and Paula Coles project supports an orphanage. b. Local Separate from the more designed efforts, there is a local market for mainly leather items, like sandals. This divides in two, the low-end uses local leather and is focused on the local lowend market, frequently sold on the street and made in small shops or peoples homes. Its potential is difficult to measure and the quality of local leather tends to be poor if not cured in an industrial facility. The high end sandals market uses imported leather and is artisanal. 1- L'atelier MODAYITI ( Construction de l'atelier, équipements, formation des techniciens, fonds de roulement pour couvrir le salaire des employés pour 6 mois et fonds pour une réaliser et mettre en vente une collection collective); 2- Haiti Fashion Week ( Fonds additionnel pour sa réalisation en novembre 2014); 3- Ouverture d'un magasin d'intrants pour les designers a meilleurs prix), Fonds de demmarrage;0ctobre 2014; 4- Ouverture d'une boutique collective avec les designers (Fonds d'implantation); Décembre 2014; 5- Participation des designers haïtiens une mission d'exploration au Mexique en mai 2014; 6- Partenariat de MODAYITI pour la réalisation de Afro K 2014, un concours international de la mode afro caraibeenne qui se tiendra en Haïti en octobre 2014. Le Conseil reste a votre disposition pour toutes discussions et informations supplémentaires. 14 Applies to other Caricom members not Latin America. The countries of the Caricom e.g. Trinidad and Tobago or the Bahamas do not have any mass industrial apparel industry. Sources can be found in OTEXA data A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 20

c. Local and tourist souvenir There are many makers of other handicrafts, such as beaded bags for the tourist market. While beading is certainly labor intensive - and the work is to some extent of better quality than the more automated beading methods its market channel is frequently the street or through hawkers. The potential of this business is unclear, since it takes place largely within the unorganised sector. The main exception is Gardé SA, run separately by Hans Garoute at the INDEPCO center who sells local and exports from an organised business. 1.11 The small stitchers Sometimes overlapping with the above there are smaller stitching shops all over Haiti a. INDEPCO (Institut National pour la Dévéloppement et Promotion de la Couture) INDEPCO has a number of business models in commercial garment making and training. Sometimes it is able to get commercial orders for the local market; sometimes it undertakes dedicated training for the mass industry and when finance avails, sometimes trains small stitchers. Commercial orders often occur intermittently depending on available fabric or demand. They are produced mainly by dispersing the production throughout the country at INDEPCO centers. These are monitored in terms of delivery and quality by regional inspectors. This center has found that it has to constantly mix government orders with donor finance and paid training provision in order to survive. Most of its operators are trainees learning the basics of sewing. Very few of the INDEPCO trainees appear to have found their way into the mass industrial industry, however, with the exception of some dedicated training done at the early stages of the SAE-A project. This may be partially due to the philosophy of INDEPCO that believes in training all-round garment making skills for the makeup of a garment i.e. tailoring rather than dedicating a trainee to simply one operation; factories may not want employees with such diverse skills. It also may be due to the lack of an active placement staff. b. Other trainers and stitchers Other centers also mix commercial and donor finance with some provision of training and some commercial activities (generally using trainee labor). These include Le Jourdain Atelier and Grahn-Monde. The latter helps victims of sexual abuse to find a vocation. In many cases, the market is local or the tourist market. c. Small stitchers independent This is two-fold: parochial village based stitchers and some work for the high end especially occasional work for the designers and also in homeware. In terms of the parochial, historically Haiti did have a unique fashion identity, but this has been eroded by the Pepe market. The village-based stitchers using pedal machines are to some extent the legacy of that industry. The market for a Haitian look was always local and low end, and where this still exists, typically for older people; these stitchers also mix in alterations of some of the existing Pepe wear. Figures on how many people are involved in this are not available since the market is unorganized. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 21

1.12 The printers (and embroiderers) Printing exists on a variety of scales. There are at least three companies with the most advanced (often digital) machinery available and also proper heat setting of the print. These are IR ii, Astro Printing and Fairway Apparel. At the other end of the scale, there is hand painting. And in-between, the use of manually operated screen prints. The difference reflects the end market. On the one hand the IR ii center is designed for export of mass garments without crocking or color fastness and dye bleeding issues; on the other hand the market for hand prints is for a tourist market where the trade is passing and the durability of product doesn t affect future sales. A third market exists for commercial printing for corporate or event wear, but many of the local printers are small and unable to compete with mainly Dominican imports. But this capability is developing, and some like Le Jourdain Atelier do have screen printing facilities and some small scale embroidery machines (normally for corporate polo wear). A hand painter at work Labadee (source Fritznel Charitable) and a digital printing machine at IR ii (source Armstrong) IR ii is also an interesting model for two reasons. Firstly the development of digital printing allows a buyer to control the process remotely and stateside - a digital printer is almost like a normal printer but in this case the client is remote. A buyer would thus be able to design a pattern and send the print job straight from its office in the USA, without having to go through the normal back and forth of sending artwork, then approving the strike-off, and then going to bulk. Secondly its working pattern has a group orientation, different from the other tee shirt makers. The workers are almost made into subcontractors, since they buy the materials in the morning and only make a profit if they sell them back in the evening with the target quantity to the right quality. 1.13 The high-end tailors Screen printer at Atelier Le Jourdain (source Armstrong It is believed that there are at least two individuals in Haiti who can make (or have made) high end men s suits, and there may have been a college feeding this capacity, called Verona. More information is being sought. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 22

1.14 Potential value chains Haiti s industry has a fairly small product mix. The potential for some additional value chains has been based on the value chain s ability to capitalise on Haiti s duty preference and proximity to the USA, or minimising the long lead time in receiving fabric by stockpiling either the fabric or the yarn when it is relatively generic. 15 Figure 16: What could be Possible new value chains VC Type Variation of fabric constructions Can stockpile Design Risk/ finance Order size Design focus Typical import duty VC new 1 E Tailor Low YES Bespoke Low because customer pays at order One by one Make up 27.7-9.4 % depending on material with suits costing $800 up VC new 2 VC new 3 Jeans Low YES Buyers Printer/ embroiderer for corporate/ event wear Blanks - variation on shade Per season only - large proportion will be white black or heather grey On print only - client High due to fabric stock Medium if blanks are fairly standard Huge Medium Finishing Printing Cotton pants have 16. 1 % import duty and jeans prices (for 5 pocket go from $4 to $8 - depending on fabric weight and finish Import duty of t-shirt - 19.7 % and also sales tax on print. Tee cost $2-3 and print cost 15c to 30c with 2 % wastage 1.15 The E- Tailors (VC new 1) Before the advent of mass sourcing in the 1960s, many jackets and suits were made by smaller tailors to a client s exact specification. Typically the tailor had a workshop above the retail outlet where measurements were taken. Normally the order had two stages: measurement and fitting. With the rise of cheaper Asian manufacturing which followed the communication revolution from the 1970s and allowed outsourcing of fashion merchandising and off-the-peg mass retailing, this declined until most suits sold today are made to a standard size assortment that covers most people. While high end tailoring did continue, for example at Saville Row in 15 If imported tee-shirts are stockpiled it is unclear what the final import duty rate would be since there is no transformation or change of HS code. A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 23

London and in Hong Kong, it became increasingly reserved for a very exclusive and wealthy market. However, Hong Kong is now merely an order-taking point with orders made up in China and dispatched back, normally within 3 days. Some stitching remains at the order taking point, where minor adjustments in the sleeve or hem can be made at the final fitting stage. With modern technology and relatively cheap air freight from some of the main garment manufacturing centers, the age of tailoring can return. High end products can be offered without the steeper price tag often below $1000. Speed to make up will always be an important factor in this business, but many consumers purchase for long-planned events, and so the time between order taking and fitting can go up to 6 weeks. 16 Often orders are taken with a body scanning machine, possibly allowing for even more automation at order taking stage, and allowing the pattern to be made up there but sent electronically to a cutting machine. The market niche for Haiti opens as the distance between order taker and make up increases, with the need to get goods quickly to market, and given that there is a fairly standard and small range of fabrics for men s formal fashion ware. Market example: A Suit That Fits, seen in the picture, is a London based company that takes order through a number of premium outlets such as John Lewis on Oxford and Bond Street. It started by sourcing from Nepal but is now moving its production to Bangalore, India and does fitting in another location in London. The model seems to work despite necessitating possibly three visits by the client to the measurement point at booking, at fitting and at collection and final fitting check. As tailors build up a rapport with repeat customers they come to know exactly what critical points affects their clients s fit and adjust accordingly. Such data while formerly in the head of the pattern maker is now increasingly held electronically. 16 See example below A Suits that Fits A p p a r e l a n d T e x t i l e s S e c t o r A s s e s s m e n t 24