PROMOTING EXPORTS of UGANDAN SPECIALTY TEXTILES to CANADA Opportunities and Challenges

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PROMOTING EXPORTS of UGANDAN SPECIALTY TEXTILES to CANADA Opportunities and Challenges PROMOTING EXPORTS OF UGANDAN SPECIALTY TEXTILES TO CANADA Opportunities and Challenges Maria Josephine Nagawa Submitted by: Maria Josephine Nagawa Lecturer Makerere University Business School Kampala, Uganda Submitted to: Trade Facilitation Office Canada (TFO Canada) and International Development Center (IDRC) September 2016 Abstract The textile industry is particularly strategic for developing countries because of its capacity to create employment across the entire value chain, to introduce new and easily adaptable technologies, and to boost incomes on both a national and individual level. The Ugandan textile industry experienced a near total collapse during the political and economic turbulence of the 1970s and 80s, and recent efforts to revive it have produced only negligible success. TFO Canada and the International Development Research Center (IDRC) have funded this study, which aims to explore the challenges and opportunities for exporting Ugandan specialty textiles and apparel to Canada and to the rest of the world, and to provide the most up-to-date information on the sector. The study gathered information on 36 small and medium sized enterprises (SMEs) producing specialty fabrics and apparel and conducted key informant interviews with various institutions affiliated with the sector. The study found that the cottage industry, where most textile producers are engaged, suffers from problems attributed to the unfavourable business environment including the high costs of credit, high energy costs, few tax incentives, and poor physical infrastructure. Nevertheless, Uganda’s SMEs boast low labour costs and unique fabrics with significant potential for quality improvements. Given the existing constraints to export, the study concludes that SMEs will not only need open markets and product promotion, but also significant investments in finance, technology, and skills training to boost their capacity to export. Acknowledgments This case study report was authored by Maria Josephine Nagawa1, a lecturer at Makerere University Business School and part time research consultant. The author would like to thank her research team for their hard work throughout the project: Sophie B. Alal, Martha Nassali, Ssekamatte Allan, Barbara Yiga and Elaine Yiga. The author would also like to acknowledge, with gratitude, the contributions from key informants: John Walugembe from Uganda Small Scale Industries Association (USSIA), Noreen Kamoti from Uganda Export Promotion Board (UEPB), Basil Ajer from the Small and Medium Enterprise (SME) Department of Uganda Investment Authority (UIA), Joel Oryang from Uganda National Bureau of Standards (UNBS), Vinnay Kumar and Richard Mubiru from Nyanza Textiles (NYTIL), Prof. Aaron Wanyama from Kyambogo University, Suudi Kizito from Ministry of Trade, Industry and Cooperatives (MTIC), Agnes Kiganda from Exposure Africa, and Fred Mutebi from Bukomansimbi Organic Tree Farmers’ Association (BOTFA). The author would also like to thank the 40 SMEs and associations that informed the findings of this study. Special thanks goes to USSIA for its support in locating the SMEs. The case study report was funded by Trade Facilitation Office Canada (TFO) and International Development Research Centre (IDRC) as part of ‘Promoting Specialty Textile and Fabrics in Least Developed Countries, a two-year research project that aims to promote exports of specialty textiles and fabrics and provide the most updated information in the sector. Its findings and conclusions are those of the author and do not necessarily reflect the positions or policies of either TFO Canada or IDRC. 1 See Appendix 1 ii Table of Contents Abstract .................................................................................................................................................... i Acknowledgments ............................................................................................................................. i i List of Abbreviated Terms ............................................................................................................ iv List of Figures and Tables ............................................................................................................. v Figures ..................................................................................................................................................... v List of Text Boxes and Images .................................................................................................. vi 1. Introduction and Background ................................................................................................. 1 1.1 Objectives of the Study ................................................................................................. 2 1.2 Methodology ................................................................................................................... 2 1.3 Structure of the Rest of the Report ......................................................................... 3 2. Uganda’s Textile Industry ........................................................................................................ 4 2.1 Overview of Uganda’s economy ................................................................................... 4 2.2 The History of the Textile Industry in Uganda ....................................................... 5 2.3 The Economic Relevance of the Textile Industry in Uganda ......................... 6 2.4 Social Dimension .................................................................................................................. 7 2.5 Environmental Dimension ................................................................................................ 9 2.6 Explaining the fabrics .......................................................................................................... 9 2.6.1 Bark cloth .................................................................................................................... 9 2.6.2 Kitenge a.k.a “African” fabric a.k.a “tribal” prints ................................. 10 3. Stakeholder Analysis and Focus Group Findings .................................................... 12 3.1 Outline of profiled companies ...................................................................................... 12 3.2 Government interventions ............................................................................................. 12 3.2.1 Standardisation .......................................................................................................... 12 3.2.2 Capacity Building ...................................................................................................... 12 3.2.3 Export promotion ....................................................................................................... 13 3.3 Challenges identified ........................................................................................................ 13 4. Business Entry Strategy into Canada ............................................................................. 15 4.1 Structure of the Canadian market ............................................................................. 15 4.2 Trade in Textiles and Apparel ..................................................................................... 15 4.3 Canada’s Trade with LDCs ........................................................................................... 17 4.4 Export Strategy to Canada ........................................................................................... 19 5. Conclusions and Recommendations .............................................................................. 20 BIBLIOGRAPHY .............................................................................................................................. 25 Appendix 1: Research Team .................................................................................................... 29 Appendix 2: Database of producers ..................................................................................... 31 Appendix 3: TFO Canada Exporter Profile ........................................................................ 33 Appendix 4: PowerPoint presentation at workshop ...................................................... 37 Appendix 5: Images of fabrics .................................................................................................. 43 iii List of Abbreviated Terms AGOA Africa Growth Opportunity Act BOTFA Bukomansimbi Organic Tree Farmers’ Association CBSA Canada Border Services Agency GDP Gross Domestic Product IDRC International Development Research Centre LDC Least Developed Country MTIC Ministry of Trade, Industry and Cooperatives SME Small and Medium Scale Enterprise TFO Trade Facilitation Office – Canada UBOS Uganda Bureau of Statistics UEPB Uganda Export Promotion Board UIA Uganda Investment Authority UNEP United Nations Environment Program UNBS Uganda National Bureau of Standards USSIA Uganda Small Scale Industries Association iv List of Figures and Tables Figures Figure 1: The supply chain in the textiles and apparel sector ..................................... 1 Figure 2: Trends in the shares of economic sectors, value added to total GDP ......... 4 Figure 3: Sector productivity per worker in Uganda (2002-2009) ............................... 5 Figure 4: Textiles Imports into Canada (2009-2012) ................................................. 15 Figure 5: Canadian Imports from LDCs under the Canadian Market
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