Textile Powerhouse Learns Downside of Globalization Clothes Made Mauritius a Big Name, But Now It Faces Brutal Competition
By CARLOS TEJADA Staff Reporter of THE WALL STREET JOURNAL
PORT LOUIS, Mauritius -- When it won independence from Britain in 1968, this tiny island off the coast of Madagascar had little to offer the world except sugar cane and white-sand beaches.
So the government decided to embrace the global economy, creating an export zone with low taxes and relaxed labor laws. And the global economy embraced it right back. Clothing companies rushed to set up textile factories on the island -- and, improbably, Mauritius became a powerhouse. Median household income nearly doubled in the 1990s, to roughly $380 a month last year, making it one of the most prosperous nations in Africa. Its textile business grew so rapidly -- turning out clothes for such global brands as Gap and Calvin Klein -- that employers had to import workers from China and India to staff their production lines.
Last year, with help from beneficial trade agreements, Mauritius exported $913 million in clothing to the U.S. and Europe. The literacy rate on Mauritius is among the highest in Africa, and the government is stable and democratic.
But now this poster child for globalization is starting to see the downside of free trade. As trade barriers ease around the world, China and India are flooding the world's markets with their own textiles and undercutting Mauritius's prices by drawing on their own vast pools of cheap labor. Since the late 1990s, thousands of Mauritians have been cast out of the textile factories as they have closed or downsized. The unemployment rate among Mauritians, who are mostly ethnic Indians, crept up to 9.8% last year, from less than 3% a decade ago, and many expect it to top 10% this year.
The story of Mauritius shows the danger of heightened expectations that success brings -- and the perils of relying too heavily on one industry. The nation has broadened into tourism and financial services over the years, but the garment industry directly and indirectly employs nearly one in five working Mauritians.
Competitive pressure will only increase. In 2005, quotas set by international agreements that benefit Mauritius will expire, putting the nation on the same footing as many other nations in selling garments to Europe and the U.S.
The unemployment picture is more complicated than it looks. Some factory owners are laying off Mauritians, but not the foreign workers who continue to enter the country. Chinese and Indian workers, the factory owners say, are more skilled and diligent than the locals, since many were trained in overseas factories and don't have family or social obligations to take their attention away from the job. Now expatriate laborers, virtually unheard of a decade ago, make up 23% of the work force that produces garments for export.
Textile executives say there are still plenty of factory jobs, but many native Mauritians are unwilling to take them. Decades of tight employment and industrial growth led to growing paychecks and a higher standard of living, and now many native Mauritians say they don't want to take pay cuts and work compulsory overtime to meet the needs of the increasingly competitive garment business. Adding to the problem, in many cases these workers don't have the training for the island's other industries.
The government, concerned about mounting unemployment, has boosted the hurdles for companies bringing in foreign workers. They must first provide proof, such as help-wanted ads and calls to local employment offices, to show their interest in hiring natives.
Bearing the brunt of the factory closings and rise in imported labor are native workers such as Razcoomaree Hurkhoo, 52 years old, who lives in a working-class suburb outside the capital, Port Louis. She started working in garment factories 25 years ago, before her two young daughters entered school. In later years, quotas for shirts and dresses sometimes rose during the day from 40 a day in the morning to 60 by the final hour of work. As faster contract workers from India arrived, they were chosen for lucrative overtime work, and she wasn't. She received her monthly base pay of a bit more than $100, but very little beyond that.
But it was all worth it, Ms. Hurkhoo says, because she was able to pay for a better education for her children. One daughter is a teacher and another is a massage therapist. "What I endured, I wouldn't let that happen to my children," she says.
Ms. Hurkhoo was one of 23 Mauritians recently laid off from her factory, owned by Ere Lingerie Ltd., a closely held local manufacturer. The contract workers from India were spared. Denis Rivet, a company spokesman, says the layoffs were performance-based and followed financial difficulties and an organizational restructuring. He says the move complied with local labor laws and the process was overseen by local government officials.
Edge of Resentment
Many laid-off natives are sympathetic to the imported workers, but with an edge of resentment. "They're all beasts of burden. They're like machines. When you have a need for them, just call and turn the machine on," says Maryline Olivier, 41, who began working in the factories at 17 and was also among the 23 workers laid off by Ere.
When it won independence, Mauritius, which is smaller than Rhode Island and has just 1.2 million residents, had high unemployment and very little in the way of industry. Nobel laureate V.S. Naipaul famously called the mostly Hindu nation, which also boasts sizable Christian and Muslim populations, an "overcrowded barracoon" -- a place to keep slaves or convicts.
But it soon came to be known among some as the "Little Hong Kong." Its government was stable and business-friendly, and Mauritians proved willing to work for small paychecks. In 1970, the government created an export-processing zone, which today gives companies tax and duty breaks, plus key exemptions from many of the nation's otherwise tough labor laws, if manufacturers export 90% or more of their production.
In that welcome environment, Mookeshwarsing Gopal founded Southern Textiles Ltd. in 1985. By 2000 he enjoyed annual revenue of $8 million, selling to mostly European customers, and today produces knitwear for the likes of Laura Ashley and German label Peter Hahn. But competition has become increasingly tough as China and India expand their garment industries and trade barriers relax. Southern Textiles recently cut 200 workers as part of an effort to centralize production.
Expatriate workers from India these days make up more than 10% of Mr. Gopal's work force. Although he pays them the same as locals, as the law requires, he considers them less costly. For instance, Mr. Gopal says the absentee rate among locals tops 10% on some days, as Mauritians stay home to attend to family and social obligations. His Indian workers, by contrast, left their families at home specifically to do factory work, so their absentee rates are very low.
Imported workers are appealing for another reason: They're prepared to do work locals are now reluctant to take on. Many Mauritians say garment-industry jobs in the export-processing zones pay too little to live on. The average garment worker in the zones earns $185 a month, compared with the $319 average for Mauritian workers as a whole.
Cie. Maurietienne de Textiles, based in the Mauritian town of Phoenix, has advertised locally, but natives haven't come knocking. "We can take people, no problem," says Louis Lai, CMT director.
In a CMT factory in Phoenix, women's tops hang like ghosts over the sewing machines of about 150 Chinese garment workers. Each worker pulls the top down from a conveyor system above their heads, sews a portion, then passes it on to the next worker. The work varies based on how long the sleeves might be, how they should be stitched and whether the sleeves end in cuffs. That's why there are Chinese workers on this part of the factory, CMT says: Many worked in garment factories in China, alternating machines, so they can handle jobs that require more skills.
At Palmar Industries Ltd., a garment company on the northern side of the island, some of the most complicated work has been assigned to the contract workers. Local workers don't have sufficient training to switch from one garment to another during the production process, explains Yves Robert Lamusse, a Palmar executive.
To spur more productivity from his local workers, he recently pinned on a bulletin board a clipping from the Mauritian French-language daily L'Express that describes China's competitive advantages over Mauritius. "I want my workers to know and to be afraid," he says.
Palmar has shifted some production to Mozambique, where labor is cheaper. The company produces 8,000 garments per day in Mozambique, compared with 50,000 in Mauritius, and hopes to produce 12,000 there beginning this month.
Mr. Lamusse says he has no choice. He holds up a gray men's tank top, made for a customer he won't disclose. "I get $3 for this" from the customer, he says. "How much did I get last year? $3.25. That's the drop, in one year."
The expatriate workers are referred by labor brokers in China and India, who scour the countryside, especially in areas with garment factories, and sign up workers to spend three years in Mauritius. Workers pay these brokers one-time fees that sometimes amount to $1,200, or about the amount a foreign worker can make in Mauritius in six or seven months. Some workers renew their contracts and return for another year or more. They usually send their paychecks home, either to their families or the broker, but keep their overtime pay and other bonuses. They live in company dormitories that are often guarded and under curfew, though on days off they can be seen traveling about the island and gambling at casinos.
On a recent night, in one dormitory off a muddy country road, a worker named Wang shut his bedroom door to keep a supervisor from overhearing him. Wang, who asked that his full name not be used, said a manager at his factory, displeased with his performance, hadn't paid him since March. Wang, a 36-year-old from the Chinese province of Fujian, said he hasn't seen his wife, his 14-year-old daughter or his son, 11, since he left three years ago. Despite his troubles, Wang is considering renewing his contract. Another manager will help him get his back pay, he reasons, and the work in Mauritius is easy enough and pays better -- roughly $200 a month with enough overtime hours -- than it would be at home.
Mud and Cigarette Butts
Living conditions for expatriate workers vary from company to company. In one dormitory, for clothing maker Tang Knitwear Ltd. in the town of Beau Bassin, two workers nervous about answering questions watched Chinese television. Above them, Christmas lights and balloons from a forgotten celebration held more than a year earlier hung over a ceramic floor covered in mud and cigarette butts. Water trickling down from the ceiling leaves a quarter-inch sloshed on the bathroom floor, and a hole punched above the toilet had been filled with straw. In the kitchen, where the dormitory's supervisor tends to a bubbling pot, grease lined the counters, the floor and soot-streaked walls.
Tang says the quarters are temporary, and the workers living there now will soon live in a new dormitory under construction. It says maids clean the dormitory daily. The dormitory in Beau Bassin was without a maid but one has since been hired, while the holes in the bathroom were done for repairs. In a statement, Vimla Booluck, a Tang official who works with expatriate workers, says the company works closely with government officials on worker issues.
The government has taken a harder stand in overseeing contract workers after two deaths of Chinese expatriate workers last year, apparently due to illness. It recently sided with Chinese workers who wanted their paychecks in their own hands rather than sent back to China. It banned the occasional practice of some companies that fired workers after 11 months, making them ineligible for a year-end bonus, then rehiring them, says Showkutally Soodhun, Mauritius labor minister.
Still, regulating the contract workers can be tough. Different government ministries watch over labor conditions, health conditions and employment. Companies are supposed to clear deportations with authorities first to make sure they aren't just getting rid of workers who complain about pay and working conditions. But the reporting is voluntary. "We have much more to do," says Mr. Soodhun.
Looking ahead, the government's problem is moving its work force beyond factories. "You can't run a country on cheap labor. You can't rely on cheap labor. Eventually, you've got to give the people something better," says Jayen Cuttaree, Mauritius commerce minister.
The government has launched an ambitious plan to draw technology services to the island. The skeleton of a multistory technology center dubbed the Cybercity looms over one corner of the island. Mauritians in the sugar-cane sector can get low-interest loans of up to $900 to buy a personal computer in an effort to teach computer skills to the next generation. Mauritius also touts its bilingual workers for call centers and financial services aimed at French- and English-speaking customers.
Still, technical skills are short on the island. The Cybercity, like the garment factories it is intended to replace, will be staffed at first by expatriate workers from India.