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SARS boosts India's textile export

May 22, 2003 19:56 IST

Severe Acute Respiratory Syndrome or SARS has boosted South Asia's $25-billion textile export sector, pushing share prices through the roof, as Western firms avoid buying trips to rival garment makers in China.

Since SARS hit the headlines in March, shares in Indian jeans, shirt and trouser maker Arvind Mills have almost doubled. Other textile shares have also risen strongly, outperforming the wider Pakistan and Indian markets.

Some analysts warn the increase in orders and spike in stock prices may be short-lived for a sector that is battling two decades of decline, but the industry hopes the spike will help turn around a sector that has suffered two decades of decline.

"There was a potential of business worth about $6 billion coming to the sub-continent in the past two months," said Vijay Mathur, a director at India's Apparel Export Promotion Council, referring to the average level of Chinese and Hong Kong clothing exports in a two-month period.

Cloth, clothing and yarn exports from India are nearly $12 billion a year, Pakistan exports total $6 billion while Bangladesh's output is $5.1 billion and Sri Lanka's $2.4 billion.

But South Asia lives in the shadow of China -- the world's largest garment exporter, where low costs mean sharper prices.

British research house Cotlook Ltd said last week orders to Indian textile manufacturers have risen, thanks to buyers diverting from China and Hong Kong for fear of catching SARS, which has killed over 500 people.

India has yet to see a case of SARS, although there have been a number of false alarms.

China troubled

Cotlook said the outbreak of SARS had substantially depressed textile exports from China and some manufacturers had cut output.

Quazi Moniruzzaman, president of the Bangladesh Garments Manufacturers and Exporters Association, said this month that exports had jumped more than 20 per cent in the past few weeks.

The key Bombay share market index has been flat since the end of March but that has not stopped the textile surge. Shares in towel and cloth maker Century Textiles have jumped by more than half and shares in menswear firm Raymond Ltd by nearly a quarter.

Pakistan's biggest listed textile firm, Nishat Mills has risen by more than a third, valuing it at $45 million, and cloth maker Shahtaj Textiles is up 16 per cent, compared with a 11 per cent rise in the main Karachi share index.

"It is a blessing in disguise for us. SARS had put us in an advantageous position over China and other affected countries," said Zubair Motiwala, a Karachi-based garment exporter.

"I am hopeful that there will be a jump of at least three to five per cent in orders from Western buyers during this season."

Short-lived gain

But industry experts cautioned that the trend could be short-lived, as Chinese garments were still cheaper.

South Asia's textile sector, based on natural fibres like cotton and wool, has been in long-term decline in the face of competition from rivals using synthetics.

"These appear to be stray deals. The impact is unlikely to last long," said Sugata Sarkar, deputy director at India's Cotton Textiles Export Promotion Council in Mumbai. "The fact remains that China is a world beater because of its pricing."

Exporters may gain when Western countries end quotas on textile imports in 2005, under a World Trade Organisation deal.

"SARS will be a short-term positive, but in the long run, dismantling of quotas will benefit big players," said Srividhya Rajesh, a Chennai-based fund manager at India's Sundaram Mutual Fund, which holds Arvind Mills and Century Textiles shares.

"These firms are set to do well if they establish strong business relationships with large US and European buyers."

Denny Thomas in Mumbai