Labour costs "pricing out" clothing industry

Estro Clothing director Joseph Hammett said yesterday the company was confident that it would secure orders from different markets following a sharp drop in demand from the US in recent months.

However, Mr Hammett stressed that Estro was not in financial difficulties. Quite the contrary. It had merely suffered a drop in orders of between 30-50 per cent because of stiff competition from Bangladesh.

Estro has been operating since May last year after buying SJI Clothing.

He said it was working hard to get orders from other markets, such as Canada, and was in no doubt that it would get them.

The General Workers' Union announced on Thursday that Estro, which makes jeans, had issued discharge notices to 40 of its 90 employees due to "economic" difficulties.

The GWU had also announced that Medwear Clothing - employing 160 workers - was to close down within weeks after 24 years in operation due to economic difficulties and uncertainties in the German market. It added that the mother company had already closed its factory in Germany.

Medwear general manager Mark Samut Tagliaferro said the company was in a healthy financial state but had reached a stage where it could not compete with eastern European countries which had much lower labour costs.

"The clothing industry is not robotised, but based on the labour element which accounts for 70 per cent of the costs. The German mother company originally started production in Malta due to the low labour costs, but these have increased fourfold since the 1970s while workers in eastern Europe are paid just 25 per cent of what workers make here. Therefore it becomes impossible to compete."

Mr Samut Tagliaferro said the company had progressed to date because it had managed to absorb the additional labour costs, but he believed that the closure in Malta reflected an international trend.

He believes it is becoming almost impossible for the clothing industry in Malta to survive because of the labour intensive nature of the industry. "And labour costs keep on rising."

He also said it would not be easy for the laid-off workers to find alternative jobs due to the current employment situation.

Meanwhile, Mr Hammett criticised the government, which he said had done nothing to help the situation.

He said the government should offer more incentives to the clothing industry, pointing out that factories in other countries even received rebates from their governments for exports.

"We took over SJI and had to pay all the debts and national insurance which was skyhigh. The rent was also high: we were charged Lm4 per square metre by the Malta Development Corporation for a factory which required a lot of work to bring it up to EU standards. This increased our overheads considerably."

However, MDC chairman Lawrence Zammit said that a charge of Lm4 per square metre was lower than the commercial rate paid today for a factory and had a minimal impact of costs when compared with the company's wage bill.

"MDC was very helpful in the process because it enabled them (Estro) to take over SJI in a short period of time."

When asked if the clothing industry was still feasible in Malta, Mr Zammit said: "The clothing industry is feasible but not all the clothing industry is feasible. There are various companies which have shown it is possible and the increase in their employment figures reflects this.

"But one has to go for products and services that require value added," he said, "and make products that sell."